Iron ore remains pressured as Chinese steel sentiment sours

Photo by Pascal Parrot/Getty Images

Iron ore spot markets finished mixed on Tuesday with higher grade ores outperforming lower grades during the session.

According to Metal Bulletin, the spot market for 62% fines rose 0.08% to $89.80 a tonne, stabilising after sliding below the $90 a tonne level for the first time since February 10 on Monday.

The group said iron ore markets remained pressured by expectations of further weakness in Chinese rebar spot prices.

“China’s spot rebar market weakened on Tuesday amid thin trading, as participants come to the realisation that the long product’s prices had risen to unusually high levels,” it said.

Metal Bulletin notes that rebar prices have been nearly the same as hot rolled coil (HRC) steel in recent days, something it describes as a “rare occurrence”.

“Normally, prices for rebar are 200-300 yuan ($US29-44) per tonne lower than those for the flat steel product due to production differences,” it says.

While the benchmark iron ore price steadied, lower grade ores continued to slide with the spot price for 58% tumbling 2% to $61.38 a tonne.

That corresponded with news earlier in the week that Chinese iron ore port inventories hit 130.05 million tonnes last Friday, according to data Shanghai Steelhome, the highest level since 2004.

Most are believed to be medium-to-lower grade ores, with higher grades in short supply.

“We heard some clients are trying to look for PB or Newman fines from ports but it seems the availability of these high- grade cargoes is rather limited,” a Shanghai-based iron ore trader told Reuters earlier this week, referring to types of high-quality Australian iron ore.

Despite the mixed performance on Tuesday, Chinese futures came under renewed pressure again overnight, suggesting that spot markets may remain capped on Wednesday.

The May 2017 iron ore future in Dalian finished down 0.45% at 658.5 yuan. Separately, the May 2017 rebar contract in Shanghai ended trade flat at 3,477.

Coke and coking coal futures also closed lower for the session, perhaps weighed down by remarks from China’s NDRC that it will not seek to lower coal output in large scale, should “prices remain in a reasonable boundary”.

SHFE Copper ¥47,250 , -1.25%
SHFE Aluminium ¥13,860 , 0.07%
SHFE Zinc ¥21,900 , -1.73%
SHFE Nickel ¥88,550 , -2.81%
SHFE Rebar ¥3,477 , 0.00%
DCE Iron Ore ¥658.50 , -0.45%
DCE Coking Coal ¥1,285.50 , -1.68%
DCE Coke ¥1,779.00 , -0.84%

Trade in Chinese commodity futures will resume at midday AEDT, around a hour before the likely release of Chinese trade data for February.

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