The iron ore rally came to a shuddering halt on Thursday, recording one of its largest declines in weeks.
Metal Bulletin’s iron ore index (MBIOI62) fell by 3.66%, or $1.89, to $49.75 a tonne on Thursday, taking it back below the $50 level for the first time since February 19.
In percentage terms, the decline was the largest seen since January 13, and narrowed the indices year-to-date gain to 14.2%.
Mirroring the decline in the spot price, Chinese iron ore and rebar futures fell heavily overnight, suggesting the fall in the spot price may continue on Friday.
The most actively traded iron ore futures contract on the Dalian Commodities Exchange finished trade at 362.5 yuan, representing a decline of 2.29%.
Rebar futures on the Shanghai Futures Exchange also fell, dropping 1.96% to 35,520 yuan.
Both will resume trade at 12pm AEDT.
Despite recent weakness in spot and futures markets, analysts at Macquarie Research believe that an expected increase in Chinese steel production, along with reduced steel and iron ore inventories within China, could help underpin the price in the months ahead.
“Post Chinese New Year, we expect steel output to move sequentially higher, and even without any restock this will help iron ore demand,” says Macquarie. “We are happier with iron ore around the $50/t mark, and would be buyers of the current forward curve, particularly Q2 2016.”
Source: businessinsider.com