Iron ore and coking coal futures slid to six-week lows in Asia on Tuesday as China returned to business after the eight-day holiday last week, and traders concluded that not much had changed. The struggling property sector remains a concern, with concerted talk of cutting steel production as Chinese mills struggle to maintain margins.
Other steelmaking ingredients were also under heavy pressure due to worries about Chinese demand, with both coking coal and coke prices sliding by more than 6%. Reuters reported that the most-traded January iron ore on China's Dalian Commodity Exchange ended daytime trade 1.7% lower at 819 yuan ($US112.40) per tonne, hitting its weakest point since the end of August earlier in the session at 812.50 yuan.
The benchmark November contract on the Singapore Exchange (SGX) dropped as much as 2.7% to $US109.25 a tonne before settling around $US110 a tonne. It has fallen about 9% from the previous quarter's peak of $US121.10. The news of the price falls will impact shares in BHP, Rio Tinto, and Fortescue Metals on Wednesday.
"Sentiment remained downbeat amid broader weakness in construction activity in China," ANZ said in a note. "Unfavorable margins have also raised the prospect of steel production cuts during winter."
Coking coal and coke on the Dalian Exchange sank 6.5% and 6.1%, respectively. SGX Australian premium coking coal futures were down 2%.
"We do expect the supply situation to improve and demand to ease as Chinese steel production moderates," Westpac said in its monthly outlook for metallurgical coal.
There's renewed concern that China Evergrande, the most indebted of China's private developers, is on the edge of total failure (it has already defaulted on numerous debts, and attempts to restructure the company have been undermined by police investigations and growing unease among foreign creditors).
China's Country Garden Holdings, the largest private developer still trading, said on Tuesday that it might not be able to meet all of its offshore payment obligations when due or within the relevant grace periods as it struggles with debt restructuring.
