Iron ore fell, extending its retreat from its February peak to 14 per cent, as ore stockpiles at Chinese ports edge ever higher and concerns about steel demand push speculators to exit at least some of their positions.
The spot price of iron ore dropped 4.1 per cent to $US81.57 a tonne at its Monday fix, according to Metal Bulletin. The steel-making raw material shed 7.9 per cent last week. The price has now fallen 14 per cent since peaking at $US94.86 on February 21.
The price reversal reflects a continuing build of iron ore stockpiles in China and concerns that steel demand will slow as the overall economy's upward momentum fades.
According to the latest weekly Shanghai SteelHome survey, iron ore inventory at 46 Chinese ports rose 1.45 million tonnes or 1.1 per cent to 132.45 million tonnes on March 24. While hot rolled coil steel inventory at 24 big Chinese cities dipped 0.3 per cent to 2.9323 million tonnes, in the March 24 week, cold rolled coil steel inventory surged 6.5 per cent to 1.481 million tonnes.
Hot rolled coil prices in China, which are typically higher than those for rebar, have fallen much lower in comparison, according to Metal Bulletin. This reversal is dampening sentiment in the steel market in a big way, affecting trade of finished steel and raw materials, according to industry observers.
In East China, HRC prices fell 130-150 yuan ($US19-22) per tonne to 3290-3330 yuan ($US478-484) per tonne during the day, Metal Bulletin reported, while those for rebar dipped by just 20-30 yuan ($US3-4) per tonne to 3590-3630 yuan ($US522-527.50) per tonne.
"There is a real risk that by the end of the year the economy could be looking quite a bit weaker," said Julian Evans-Pritchard, an economist at Capital Economics in Singapore, the current quarter may prove to be as good as it gets amid policy tightening and slower credit growth.
As for futures, Chinese steel and iron ore futures are now at their lowest in more than six weeks.
The most-active rebar contract on the Shanghai Futures Exchange closed down 2.9 per cent at 3057 yuan ($US444.57) per tonne.
During the session, it fell as far as 3003 yuan, its lowest since February10 as funds and other speculative investors exited long positions and placed fresh bearish bets.
"China's steel market is showing signs of price weakness and the move of (hot-rolled-coil) prices into a discount relative to domestic rebar prices is a sign of further weakness ahead," said Barclays Capital.
"We feel that there is further downside risk for the benchmark (iron ore) price."
Iron ore traded on the Dalian Commodity Exchange slid 1.8 per cent to 548 yuan.
The bank expects the spot price of iron ore to average $US70 per tonne in the second quarter, down from around $US80 currently.
The latest sell-off threatens the months-long rally and was triggered by concerns about demand from the building sector after Beijing imposed fresh curbs on lending in real estate in China last week.