Iron ore prices dropped on Friday as the Chinese steel industry leadership and parts of the government tried to cool the hot steel market.
The spot iron ore price for northern China fell 4.7% to $US75.19, and well under the four month high hit early last week.
That was up slightly from the close the previous week of $US74.12.
As part of the ‘jawboning’ Reuters reported that the Shanghai Futures Exchange warned its members it may raise margins on steel rebar futures contracts if turnover is too high.
If that happens, it won’t be the first time the government has tried to throttle the surge in steel product prices in the past year and CISA also tried to drop expectations that steel product prices in China would continue rising to the end of this year.
The Association held a meeting on Wednesday with its members, and a meeting hosted by the government’s National Development and Reform Commission (the country’s chief planning body) was held Thursday.
CISA said after its talks on Wednesday, which included representatives of steel companies, brokerages and consultancies, that the recent rally was “speculative” and was “not driven by market demand or reduced market supply."
Reuters said the ‘the association also said that some market players were “misreading” the likely impact of measures to idle some steel-making capacity in the second half of this year as part of efforts to limit pollution.”
Even though the spot iron ore price for 62% ore fell on Friday, it is sill up 44% from its low on June 13. The fall will likely put pressure on the share prices of BHP, Rio Tinto and Fortescue this morning.
BHP Billiton and Rio Tinto shares dropped 1.9% and 2.8% respectively on Friday – when the wider market fell 1.2% – and were down 0.7% and 3.2% for the week. Fortescue shares were down 6% last week after falling 4.5% on Friday when the big fall was becoming apparent in the afternoon.
Gold starred last week thanks to the rise in tensions between the US and North Korea, aided by intemperate, blustering language from both country’s leaders.
The metal (a ‘safe’ haven in times of tension) saw its strongest weekly gain in four months on Friday to settle at the highest level in more than two months.
“We expect geopolitical risk to remain elevated for the remainder of 2017, as tensions with North Korea persist, which will lend some support to gold prices, as well as other safe-haven assets such as the Swiss franc and the Japanese yen,” said Cailin Birch, commodities analyst at the Economist Intelligence Unit.
“However, we do not forecast a spike in gold prices, as we do not expect these tensions to devolve into outright conflict,” she said in emailed commentary to Marketwatch.com.
Comex December gold rose $US3.90, or 0.3%, to settle at $US1,294 an ounce. The settlement was the highest for a most-active contract since June 6, according to FactSet. For the week, gold was up 2.3% – its strongest weekly gain since the week ended April 13.
Comex September silver added half a cent, or less than 0.1%, to $US17.07 an ounce, for a gain of roughly 5% on the week. The settlement price was the highest since mid – June.
And Comex, September copper which hit a two year plus high on Tuesday of $US2.9425 a pound, added just under a cent to $US2.912 a pound.
It was up around 0.9% for the week. Tuesday’s high was the best price since May 2015.
Oil futures rose on Friday, finding some support as data showed that the number of active US oil rigs rose for the week (after the small dip the week before), raising the likelihood that drilling activity hasn’t steadied as thought.
Prices, however, still ended lower for the week after reports of a climb in July OPEC crude production, and as tensions between the US and North Korea kept investors on edge – and will do again this week.
An upbeat monthly report from the International Energy Agency helped improve the tone for oil on Friday.
Us natural gas prices saw their biggest weekly price rally of the year as a weather-related rise in demand caused US supplies to climb less than the market expected last week. prices were up 7.5% for the week to $US2.983 per million British Thermal units.
September West Texas Intermediate crude futures added 23 cents, or 0.5%, to settle at $US48.82 a barrel in New York. That was a weekly loss of around 1.5%, according to FactSet data.
In London October Brent crude added 20 cents, or 0.7%, to $US52.10 a barrel, with prices down about 0.6% for the week.
The weekly US rig report showed a rise of 3 in the number of active US oil drilling operations – up to 768. That was after the fall of a single rig the week before.
But the total number of rigs fell by 5 to 949, as 8 gas operations closed.
The IEA said in its monthly note that that crude output from OPEC climbed by 230,000 barrels a day in July to a new 2017 high of 32.84 million barrels a day.
“The compliance rate with OPEC’s output cut fell again in July to a new low of 75% from June’s revised figure of 77%. For those non-OPEC countries acting in support, their compliance rate in July was 67%.
Together, the twenty-two countries are producing about 470,000 barrels a day in excess of their commitment,” the IEA said in its report. Libya saw a big rise in output
Investors seemed to ignore than and concentrated on the more upbeat lift in by the IEA in its demand growth forecast for 2017, saying it expects demand to increase by 1.5 million barrels a day, to 97.6 million barrels a day.
And the agency also pointed out that commercial oil stockpiles in industrialised nations have fallen below 2016 levels, but the rebalancing of supply and demand still remains a “stubborn process” despite robust consumption.
In the second quarter global inventories fell by 500,000 barrels a day to just over 3 billion barrels.
