Iron ore futures in China slid more than 5 percent to a three-week low on Tuesday as a drop in Shanghai steel prices fueled further losses in the raw material, putting its big gains this year at risk.
A rally in Chinese steel prices on expectations of a pickup in seasonal demand fired up iron ore earlier this month, making the steelmaking ingredient this year’s top performing commodity.
The correction in iron ore seems to be in sync with those in other industrial commodities, said Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“There is a view gathering that the rally we’ve seen in industrial exposed commodities is overdone and that a pullback is on the cards,” he said.
The most-traded September iron ore on the Dalian Commodity Exchange closed down 3.4 percent at 379 yuan ($58) a tonne, after falling as far as 371.50 yuan, its lowest since March 7.
On the Singapore Exchange, June iron ore dropped 1.9 percent to $47.72 per tonne.
That could weaken bids for physical iron ore cargoes, traders say, and drag down the spot benchmark.
Iron ore for immediate delivery to China’s Tianjin port slipped 0.5 percent to $55.20 a tonne on Monday, according to The Steel Index.
The spot price has fallen almost 13 percent from a nearly nine-month high of $63.30 reached on March 8, but still up about 29 percent for the year.
McCarthy believes the price is unlikely to return to below $40 a tonne, seeing key support at around the $50 level.
“In the iron ore market, there’s a perception that there’s been a shift (in sentiment) and in particular the very low inventory levels among Chinese steel producers brought about a lot more optimism,” he said.
On the Shanghai Futures Exchange, construction-used rebar closed down 1.1 percent at 2,159 yuan a tonne, but off a session low of 2,123 yuan.
Source: ReutersPrevious Next