Iron ore prices clawed their way back for the second consecutive session on Wednesday, following its fall on Monday’s night session.
The uplift in Chinese steel futures was generated by bulk fuel buying in commodity contracts.
The benchmark for iron ore spot prices in the March quarter of next year has recovered to $70 a tonne. After the price for benchmark, 62% fines rose to $66.35, up 1.8% on top of the 1.5% seen on Tuesday.
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Iron ore prices helped by strength in commodity contracts
Monday’s trading saw the steepest declines in iron ore prices since early 2017. This was most likely due to weakness in Chinese steel prices, and an erosion of profitability at Chinese steel producers.
Though it was quickly corrected over the next two trading sessions. An analyst at Goldman Sachs commented on the recent slide in prices, saying ‘Most of the price correction should be behind us’.
The price of higher grade ore also lifted, as 65% Brazilian fines tallied to $82.90 a tonne, up 1.3%. Meanwhile, 58% fines straggled in comparison, rising by 0.6% at $40.31 a tonne.
Goldman Sachs’ analyst put the correction period down to a widespread sell off.
‘We think the broad-based sell-off in steelmaking raw materials is mainly driven by weakening steel margins, which in turn is due to looser-than-expected winter steel production curtailment and higher-than-expected steel supply in a macro environment with elevated uncertainties and weak sentiment.’
But investors should expect such circumstances to continue for long, as noted forecasting for March next returned to $70 a tonne, in accordance with reduced supply and restocking demand from Chinese mills, as reported by Business Insider Australia.
Iron ore futures spent most of Wednesday’s day session, clawing its way to 471.5 yuan, up significantly from 469 yuan on Tuesday.
For today’s session there is little warning as to what spot markets will do come midday.
Iron ore prices next quarter look in
Moving into the next quarter, you can expect that iron ore prices will remain relatively consistent, or at least as consistent as they can in China’s economic slowdown.
As always, the things you should be looking out for are Chinese steel futures, and any influx in buying or selling of commodity prices.
While volatility makes some investors nervous when it comes to investing, with something like iron ore it should almost be expected, and at the very least anticipated.
More to come.
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