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Iron ore is on its longest losing streak in years

David Scutt
  • The benchmark iron ore price has fallen for seven consecutive session, the equal-longest losing streak since 2016.
  • Strategists say pessimism over the outlook for Chinese steel demand is one factor undermining prices.
  • Chinese futures finished mixed in overnight trade, providing few clues as to whether the losing streak will extend today.

Iron ore is on its longest losing streak seen in years.

According to Metal Bulletin, the spot price for benchmark 62% fines fell 0.2% to $69.93 a tonne, extending its losing streak to seven consecutive sessions, the equal-longest since September 2016.

You have to go back to July 2015 to find a longer stretch of losses.

The benchmark has now lost 11.9% since March 1, leaving it at the lowest level December 11. It's now down 3.7% for the year.

Weakness was also seen across the grades on Monday.

The price for 58% fines slipped 0.4%, settling at $40.36 a tonne. Ore with 65% Fe content fell a little more, losing 0.9% to close at $86 a tonne.

Like the pattern seen in recent days, the losses coincided with another bloodbath in Chinese bulk commodity futures during the session.

The May 2018 iron ore contract in Dalian shed 2.6%, finishing Monday's day session at 479 yuan a tonne. At one point it fell to 475.5 yuan a tonne, the lowest level since November.

Coking coal and coke contracts were also hammered, sliding 3.9% and 3.7% respectively to close at 1,266 yuan and 2,002 yuan a tonne.

Rebar futures, in comparison, were spared the worst of the losses, losing 0.8% to close at 3,709 yuan a tonne.

While rebar futures outperformed, strategists put the weakness in the bulks down to pessimism about the outlook for Chinese steel demand.

"[There's been] a huge rise in rebar inventory in recent weeks," said Robert Rennie, Head of Financial Markets Strategy at Westpac Bank, in a post placed on Twitter. "This is a factor that has weighed on [the] steel/iron ore sector in China in my view."

This chart from Rennie reveals current rebar inventory in China now stands at the highest point since April 2013, or January 2014 on a seasonally adjusted basis.

Suggesting that the pessimism surrounding steel demand may starting to ebb following recent declines, futures in Shanghai posted a small lift in overnight trade.

Here's the scoreboard.

SHFE Rebar ¥3,724 , 0.13%
DCE Iron Ore ¥480.50 , -0.21%
DCE Coking Coal ¥1,262.00 , -2.25%
DCE Coke ¥2,003.50 , -1.52%

The May 2018 rebar contract closed at 3,724 yuan, marginally above the 3,709 yuan a tonne level it finished Monday's day session.

Iron ore, coking coal and coke futures were mixed in overnight trade, finishing close to where they began the session.

Trade in Chinese commodity futures will resume at midday AEDT.