Watch for further disruption in the iron ore market and lower prices from today as China re-opens markets and some of the economy after the extension to the week-long Lunar New Year holiday which at this stage could end next Monday, February 10 for some businesses.
Chinese government and other services have been operating as the country battles the worsening coronavirus crisis with close to 300 deaths and 12,000 infections across the country and rising.
Unless there is late notice, share and commodity markets will resume trading today inside China and the immediate picture isn’t looking good.
Global copper and oil prices plunged last week (See separate story) and big losses are expected on the Chinese stock markets for today at least.
That was after iron ore prices took the expected hit when trading resumed late last week after a short closure for the holiday. The global price ended at a two month plus low of $US84.94 a tonne delivered to northern China.
That was a drop of 9% in a very short week to $US8.77 a tonne and came after a 4% fall the week before. Prices lost close to 8% in January after ending 2019 at $US93.13 a tonne.
Trading was flat on Friday, January 31 as the widespread coronavirus has cast a bearish outlook over markets including iron ore.
No domestic steel prices were quoted last week and analysts warn that mass-selling today and tomorrow could see prices down in the physical and futures market, which a knock-on impact on iron ore (and coking coal) prices.
So last week’s 9% fall could easily become much larger very quickly if traders panic and traders and others try to unload stocks.
Because of the timing of the Lunar New year in either January or February, both months are two of the three weakest months for the economy sand areas such as investment, imports and exports and steel is no different.
Steel consumption and production are up to 10% below the monthly average (spread over the year) and analysts say that had the coronavirus occurred outside the holiday period, it could have a much greater impact on iron pre, steel, coal and associated product prices as buyers and traders dumped their stocks to avoid getting caught.
As it is some dumping of stocks of bought material will happen this week, driving prices lower until the market steadies with more information given by the Chinese government on the progress of the virus and the rate of infection and deaths.
The Metal Bulletin reported at the weekend that:
“The Chinese government has already imposed restrictions on the movement of people and goods and extended the holiday period until Monday, February 10.
“The Hubei region is not a major industrial hub, but Wuhan is still an important steel-producing region and a connection point where raw materials pass through the Yangtze and Hanshui rivers to supply iron ore to the Wuhan Iron and Steel Corporation (WISCO), among others.
“These river transport routes have already been placed under lockdown.
“At Chinese ports, they are taking strict prevention and control measures to contain the virus spread, which is likely to slow down the loading and discharging rate of raw materials.
“Some ports in the Hebei province are shut through the extended holiday period, which would stop steel exports, with implications on the wider Asian seaborne steel markets,“ the Metal Bulletin reported.
