Iron ore spot markets tumbled for a second straight session on Wednesday, mirroring another ugly plunge in Chinese futures earlier in the day.
The decline in futures was ugly, and there’s been little improvement on that front overnight.
According to Metal Bulletin, the spot price for benchmark 62% fines skidded 2.39% to $60.52 a tonne, leaving it sitting at the lowest level since May 11.
It has now lost 4.22% over the past two days, extending its losses this year to 23.3%.
Like the benchmark, prices for both higher and lower grades weakened during the session.
Metal Bulletin said that the weakness was likely to do to with a plunge in Chinese steel futures earlier in the day.
“Softening futures and falling billet prices led to bearish sentiment emerging in the spot rebar market,” it said. “Buyers anticipating further price drops lowered their purchasing volumes during the day.”
Analysts at the Steel Index suggested that the weakness in futures was in part due to Moody’s decision to downgrade China’s sovereign credit rating to A1 from Aa3 that was announced before the start of trade.
“The economic mood turned sour in China as Moody’s downgraded the country’s debt, helping send the futures into a sharp dive,” it said. “The most active Dalian iron ore futures contract lost 6.94%, while SHFE rebar declined 2.23%.”
And those substantial gains were maintained in overnight trade.
The September 2017 iron ore future in Dalian fell 2.25% to 456 yuan per tonne, leaving it around the same level as Wednesday’s day session close. Rebar futures on the Shanghai Futures Exchange also softened, losing 0.34% to 3,247 yuan.
SHFE Rebar ¥3,247 , -0.34%
DCE Iron Ore ¥456.00 , -2.25%
DCE Coking Coal ¥1,038.00 , -1.38%
DCE Coke ¥1,527.00 , -1.55%
While not an extension of the weakness seen on Wednesday, it suggests that sentiment in futures remains skittish for the moment.
Trade in Chinese futures will resume at 11am AEST.