Iron ore futures started the week on soft note, due to corrections in steel prices that dampened market sentiments.
The futures of Dalian Commodity Exchange (DCE) for September delivery then plunged down by 8.79% day-on-day or down RMB 108 to RMB 1,121/mt on Monday.
The steel rebar contract on the Shanghai Futures Exchange also went down by 4.21% or RMB 215 day-on-day to RMB 4,889/mt.
Lower steel prices for the week
The decline followed the slump in steel prices as the Tangshan billet prices dropped by RMB 60 over the weekend and later by RMB 50 on-day to RMB 4,850/mt on Monday.
Further price corrections for steel products like rebar and wire rod were expected for the June 21-25 period, due to higher steel stocks and softening demand.
According to Mysteel, the rebar stocks among Chinese commercial warehouses reached 10.9 million as of June 17, up 6.3% week-on-week, which was the first rise in stocks after 14 weeks of declining stocks.
Crackdown on commodity price speculation
The falling futures also related to tougher stance taken by the Chinese authorities as they launched a probe into iron ore spot market on Monday.
The investigation team aimed at stopping market hoarding and speculation that jacked up prices in an unsustainable manner that put pressures on mid and downstream companies, according to the country’s National Development and Reform Commission (NDRC).
Furthermore, the commission had also initiated an investigation into coal prices, which led to some market talks of extending the probe to other commodity prices assets as well.