Monday last week was a landmark day for the iron ore market. The spot price jumped by 18.6%, or $9.99, to $63.74 a tonne. It was the largest increase ever recorded and left the price at levels not seen since the middle of last year.
In an instant the narrative around iron ore changed in some corners. China was ramping up its fiscal spending in an attempt to bolster growth, the bottom for iron ore miners was in and instead of detracting hundreds of millions from Australia’s budget revenues it was all about how much the price surge would boost the government’s coffers over the forward estimates.
It seemed all a little too good to be true. And it was.
Over the next six trading sessions the benchmark spot price has lost over 17%, leaving it below the level seen before last Monday’s record breaking rally. While year to date the price is still up over 21% – still impressive nonetheless – the optimism has evaporated in the space of just one week.
Just look at the price action:
According to Metal Bulletin, the spot price for benchmark 62% fines plunged 4.8% to $52.88 a tonne overnight, leaving it back at levels last seen on March 1. Weakness in Chinese steel prices – often regarded as a lead indicator for the iron price – was the chief catalyst behind the continue price slide.
Suggesting that the sell off in the spot price mat extend into a seventh consecutive session on Wednesday, Chinese iron ore futures fell by a further 0.95% to 415.5 yuan in overnight trade. Rebar futures actually rose for the first time in days, gaining 0.1%, offering hope that the speed of the decline may slow in the session’s ahead.
Both contracts will resume trade from 12pm AEDT.