The most-traded iron ore futures contracts on the Dalian Commodity Exchange (DCE) tumbled on Tuesday as bearish sentiment, building for a week, took form. The contract for May delivery plunged by Yuan 114/dmt ($17.5/dmt) from Monday’s settlement price to close the daytime session at Yuan 1,031.5/dmt, or nearly hitting the DCE’s 10% limit down, Mysteel Global notes.
On the same day, the iron ore contract for September delivery did actually hit limit down from Monday’s settlement price to close the daytime session at Yuan 918/dmt, according to DCE’s data.
“Market sentiment worsened during the day,” a Shanghai-based analyst with a futures company said bluntly.
According to him, the bearish sentiment that had already emerged in the domestic macro financial market has permeated into individual sub-markets including stocks and futures, with the iron ore market having no means of escape. Meanwhile, the demand-supply fundamentals for iron ore have their own changing dynamics impacting market mood.
“The recent restrictions on local steel mills’ production and raw materials transportation in Tangshan have already affected local iron ore demand there, but ore supply for now remains relatively stable. Such changes in fundamentals have further reinforced the bearish market sentiment and together, produced the substantial downward correction in ore prices in the futures market,” the analyst explained.
The local government authorities in Tangshan, the most important steelmaking hub in North China’s Hebei province, have frequently required local steel mills to curb their steelmaking operations since mid-February due to the poor air quality.
In fact, just on March 8 the curbs on mills’ operations were further toughened, with more sintering machines and blast furnaces involved. Meanwhile, truck transportation from and to local plants and ports has also been restricted again, in response to the worsening air quality, other market sources noted.
A second Shanghai-based analyst also voiced concerns about iron ore demand in the near-future. “In fact, I suspect that for the time being domestic iron ore demand has already neared its yearly peak,” he remarked.
On the sellers’ side, iron ore supply has been more stable recently. Mysteel’s data showed that the total stocks of imported iron ore at China’s 45 ports hit a nearly four-month high of 127.9 million tonnes as of March 4, reversing up from the prior period’s dip by 1.4 million tonnes or 1%.
On Tuesday too, the most traded rebar contract on the Shanghai Futures Exchange for May delivery also dropped, with the contract easing by Yuan 187/tonne or 3.9% from the settlement price of March 8 to close the day-time trading session at Yuan 4,592/t.
Written by Victoria Zou, zyongjia@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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