Iron ore and steel futures in China dropped more than 1 percent on Wednesday, falling back after rapid gains that pushed the steelmaking raw material to its highest in three years.
Iron ore has been tracking steel prices that have benefited from China’s efforts to cut excess production capacity, but some traders say the spike in iron ore futures – which lifted the spot benchmark to a two-year peak – was too fast too soon.
“It was driven by money,” said an iron ore trader in Beijing, citing speculative activity in the futures market.
“There was some demand to stockpile iron ore ahead of the holiday but I don’t think the demand was quite that strong,” she said. Chinese markets will be shut for a week for the nation’s Lunar New Year break in late January.
The most-traded iron ore contract on the Dalian Commodity Exchange was down 1.6 percent at 636 yuan ($93)a tonne by 0245 GMT, after earlier hitting its loftiest since December 2013 at 666 yuan.
On the Shanghai Futures Exchange, rebar slipped 1.3 percent to 3,284 yuan per tonne. The construction steel product touched a one-month high on Monday.
Iron ore has increased 15 percent so far this month and rebar has risen 13 percent, as both commodities extended last year’s massive gains that came after years of declines.
Restocking demand for iron ore ahead of China’s Lunar New Year holiday that starts at the end of next week has waned, and could weigh on prices, traders said.
“We asked several mills and they said they have already bought enough cargo for the coming holidays,” said a trader in Shanghai.
Iron ore for delivery to China’s Qingdao port fell 2.5 percent to $81.55 a tonne on Tuesday, a day after touching a 27-month high, according to Metal Bulletin.
Source: ReutersPrevious Next