Earlier this week, Metal Bulletin warned that “recent volatility across the iron ore market looks set to persist as no definitive trend has materialised in recent weeks”.
Going off the price action in spot and futures markets on Tuesday, it appears that assessment was on the money.
Prices were thumped, suffering their largest one-day fall in months.
According to the group, the spot price for benchmark 62% fines slumped by 4.26% to $87.59 a tonne, extending its decline from Thursday last week to 5.4%.
The fall on Thursday was the largest in percentage terms since December 14 last year, trimming its gain so far in 2017 to 11%.
Lower grade ore also came under pressure with the price for 58% fines sliding by 2.88% to $61.45 a tonne.
The weakness in spot markets followed a sharp plunge in Chinese rebar futures earlier in the session, dragging iron ore futures lower as a consequence.
“Zhou Xiaochuan, the governor of the People’s Bank of China, told G20 finance ministers and central bank governors meeting on Monday that gradual deleveraging remains one of the main themes of China’s monetary policy for this year,” said Metal Bulletin.
“Market participants said his comments may have led to futures — particularly the rebar contract — tumbling during the day.”
It seems an obscure reason for the scale of the decline, but, as the seasoned investor knows, increased speculation in futures markets has led to heightened intraday volatility in many contracts, including iron ore.
And that wild price action continued overnight, although the scale of the declines were smaller than those seen during yesterday’s day session.
The May 2017 iron ore future on the Dalian Commodity Exchange closed down 1.51% at 685.5 yuan, while rebar futures traded separately on the Shanghai Futures Exchange fell by a smaller 1.02%, finishing the session at 3,488 yuan.
SHFE Aluminium ¥13,820 , 0.11%
SHFE Zinc ¥23,245 , -1.46%
SHFE Nickel ¥84,180 , -0.31%
SHFE Rebar ¥3,488 , -1.02%
DCE Iron Ore ¥685.50 , -1.51%
DCE Coking Coal ¥1,300.00 , 0.15%
DCE Coke ¥1,886.00 , -0.29%
Trade in Chinese commodity futures will resume at midday AEDT.