Iron ore stabilises after several days of heavy losses

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Iron ore prices stabilised on Monday, supported by dip-buying in Chinese futures and renewed weakness in the Chinese yuan.

According to Metal Bulletin, the spot price for benchmark 62% fines added 0.2% to $74.49 a tonne, stabilising after falling 5.8% last week.

Elsewhere the moves were modest.

The price of 58% fines was unchanged at $46.92 a tonne while ore with 65% Fe content lost 0.2%, finishing the session at $98.10 a tonne.

The stabilisation in spot markets followed a recovery in Chinese rebar and iron ore futures during the session.

Rebar futures in Shanghai closed down 1.16% at 3,835 yuan per tonne, while iron ore futures in Dalian fell by a larger 2.2% to $533.50 yuan per tonne.

Despite the losses, both contracts closed off the lows struck earlier in the session.

Like spot markets, they fell heavily last week, hinting that the recovery on Monday may have been assisted by dip-buying by investors. Renewed weakness in the Chinese yuan may have also supported prices given futures are priced in yuan-terms.

Most base and bulk commodities contracts also rose from earlier session lows, hinting that the yuan may have been a factor.

After recovering during Monday’s day session, futures continued to rally in overnight trade, pointing to the likelihood that spot markets may follow suit today.

Here’s the scoreboard from Monday’s night session.

SHFE Rebar ¥3,940 , 1.00%
DCE Iron Ore ¥539.50 , 1.79%
DCE Coking Coal ¥1,463.00 , 4.20%
DCE Coke ¥2,454.50 , 3.54%

All contracts finished higher than Monday’s day session close, especially coking coal and coke contracts which soared by 3.5% or more.

Trade in Chinese commodity futures will resume at 11am AEST, around 15 minutes before the People’s Bank of China (PBoC) announces its yuan fixing level for Tuesday.

Given the relationship between the two yesterday, further weakness in the yuan may act to support prices during the session.

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