Iron ore futures in China fell for a second straight session on Wednesday as the market awaited clarity on the magnitude of supply disruption following Vale SA’s dam closures.
Steel prices also fell, with the most-active rebar contract ending lower for a second day, as worries over weak demand in top consumer China persist.
The most-traded iron ore on the Dalian Commodity Exchange settled 3.3 percent lower at 624 yuan ($92.34) a tonne, after hitting as low as 615 yuan earlier in the session. The steel-making raw material had hit a record high of 657.5 yuan on Tuesday but ended lower after an eight-session rally.
“I think this is just a natural volatility after such a big supply shock,” said Daniel Hynes, senior commodity strategist at ANZ. “At the moment no one is really sure how things will progress (in Brazil) in the immediate term.”
Brazilian miner Vale, the world’s largest iron ore producer, has declared force majeure on some iron ore contracts after a court-ordered halt to a mine responsible for nearly 9 percent of its output following a tailings dam burst that likely killed more than 300 people.
The force majeure came after a court ordered it to stop using eight tailings dams. Analysts have raised their forecasts of affected iron ore output to 70 million tonnes from 40 million tonnes initially.
Other steel-making ingredients were also lower, with coking coal edging 0.4 percent lower at 1,279 yuan a tonne, while coke slipped 1.7 percent to 2,066 yuan.
The most-active rebar contract on the Shanghai Futures Exchange ended down 2.5 percent at 3,702 yuan. Hot rolled coil dropped 2.1 percent to 3,608 yuan.
“That probably has something to do with the economic outlook in China. We’ll wait and see how the data this week pans out. I do suspect the market is getting a little nervous,” Hynes said.
China’s trade engine likely remained stuck in reverse in January, with data to be released on Thursday expected to show imports and exports fell for a second month in a row, adding to concerns the economy may be at risk of a sharper slowdown.
Yaang Pipe Industry Co., Limited (www.yaang.com)