Iron Ore Market Update
Market Commentary
Iron ore futures declined sharply on Thursday over mounting inflation concerns as well as fears that China will step up its efforts to control raw material costs. Iron ore has endured one of its most volatile weeks to date, surging to unprecedented $233 on Wednesday amid robust demand in China and the rest of the world as well as concerns over fresh production curbs and worsening Australia-China’s bilateral relations. The recent surge in prices has alerted authorities in China as they stepped out efforts to tame the markets. The Dalian Commodity Exchange responded by raising trading limits and margin requirements and pledged to strengthen market supervision while also urging market participants to control risks. Prices of the steel-making ingredient came crashing down on Thursday, losing over $20 from its peak, after Chinese Premier Li Keqiang urged the nation to effectively deal with the surge in commodities and its impact. This followed efforts by bourses this week to tame the markets by raising trading limits and increasing fees which resulted in a pullback on Tuesday. This was exacerbated by an unexpectedly strong US consumer price increases which fuelled worries that inflation might disrupt the global recovery or prompt central banks around the world to pull the plug on their stimulus measures. Global equities and industrial materials were broadly weaker on Thursday following the biggest one-day drop of the S&P 500 Index in over three months as inflation concern mounts.
Meanwhile, consumption in China remains robust. According to the latest data by Mysteel, total rebar inventory in China fell by 6.58% this week to 11.56 million tonnes while production was down for the first time in seven weeks by 1.42% to 371.56 million tonnes.
Futures in Singapore took a heavy beating on Thursday. Jun was seen trading down to as low as 208.0 before rebounding to just under 212.0 at the close. After the close, Jun eased off again, gradually leaking down to 210.0. Spreads have narrowed a touch, with Q1/Q2 trading down to 10.5. Cal22/23 was marked down to around 29.4. May/Jun traded and 3.0 and 3.25.
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