Iron ore prices were given every reason to plunge on Monday but didn't

Iron ore spot prices were given every reason to plunge on Monday but didn’t.

Chinese futures were hammered, losing over 7%, while port inventories in China swelled to the highest level seen since October 2014. Growth in Chinese new home prices also slowed sharply, rising by 0.6% in November following a 1.1% gain in October, casting renewed doubt on the outlook for commodity demand.

Despite all those factors, spot markets held up fairly well.

According to Metal Bulletin, the spot price for benchmark 62% fines fell by just 0.33% to $81.22 a tonne, trimming its year to date gain to a still-massive 86.4%.

Perhaps explaining the relatively small price decline, the enormous drop in Dalian iron ore futures happened right at the end of the trading session, meaning it may not have impacted sentiment in spot and physical markets.

While the benchmark price put in a resilient performance, lower grade ore came under significantly greater selling pressure with the price for 58% fines sliding 2.63% to $58.86 a tonne.

Analysts at Metal Bulletin said the decline corresponded with weakening demand in northern China as steel mills were ordered to curb production due to environmental concerns.

“Iron ore demand has been depressed by the pollution cut measures taken in the whole Hebei province, including Beijing and Tianjin,” the group said, citing a source at a local mill.

“The northern China steel production hub of Tangshan has ordered all local iron ore sintering operations to stop and 50% of the city’s blast furnaces to hot idle from 6pm on December 18, amid an ongoing red alert on air pollution.

“The measures are strict this time and many operations have already stopped,” said Metal Bulletin, citing sources.

Despite that and other perceived negatives on prices, Chinese iron ore futures rebounded in overnight trade, closing the session down just 0.6% at 575.5 yuan.

While still a decrease, futures currently sit well above the 560 yuan level seen at the end of Monday’s day session.

Trade in Chinese futures will resume at Midday AEDT.

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