Iron ore prices remain erratic despite continual declines in Chinese steel futures, leaving the future of iron ore in the hands of local speculators as it continues its seemingly wayward and directionless movement.
Investors holding contracts in China’s iron ore futures saw them fall to a three-year low, as well as this, trading has almost halved in volumes since May this year.
Iron ore is currently trading at US$66.03 per US tonne.
Comparatively, there was a mixed price performance after Chinese steel and bulk commodity futures yesterday.
Iron ore prices suffer after companies begin direct trade
In an effort to increase volume, the Dalian commodity exchange opened its iron ore derivative contract to foreign investors. According to The Australian Financial Review, it was also in part to lift China’s impact in pricing of its major commodity imports, like iron ore, steel and coking coal.
Making it the second contract of its kind to do so after the Shanghai oil futures.
A Shanghai-based trader commented on the decision, as reported by The Australian Financial Review:
‘The biggest players in the iron ore futures market are not the physical traders. They are people who would try any futures market where there’s opportunity to make money.’
The worlds most traded iron ore contract fell 34 million lots last month, against its previous 60.1 million lots in May.
Wang Bing, a spokesman for the Dalian exchange, told Reuters that:
‘Iron ore prices have been really flat in recent months. Therefore industrial investors have less hedging demand, while speculators have less interest to invest.’
While Dalian Commodity Exchange’s Chief Executive Officer, Wang Fenghai, confirmed during an industry conference last week that there was over 50 foreign companies that have begun trading the Dalian iron ore futures contract.
Doubt still looms over future of Iron ore prices
Despite last Friday’s spot markets closing with mid and higher grades, lower grades continued to decline.
The manager of iron ore and steelmaking resources at Beijing’s office of Japanese trading firm Itochu Corp, Tatsushi Shigemori, left investors with this to say about iron ore prices:
‘We’re not decided yet. We need to watch the futures market and transaction volumes.’
And this was very much so reflected in the uncertainty of iron ore prices, as well as China’s slowing economy.
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