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Iron Ore prices swing wildy in Asian trading

A volatile start to the second quarter for iron ore prices which swung sharply in trading across Asia on Monday.

Iron ore prices slumped sharply, then rebounded just as sharply on Monday in holiday -impacted trading after China’s steel industry associated urged producers to cut production and iron ore stocks at 45 major Chinese ports hit their highest level for more than two years.

The dramatic call came over the western Easter break saw the price of 62% Fe fines traded on the SGX iron ore platform slump more than 5% at the opening to a low of $US95.60 a tonne from $US101.04 a tonne last Thursday.

But after bottoming out at $US95.40 a tonne, the price gradually made its way back to eventually crawl to $US101.65 a tonne,

That was up 0.6% from Thursday’s close and a long way from the startling $US95.40 low hit in the first hour of trading on Monday.

Prices on the Dalian futures market in China showed a similar path – falling, then rebounding to end of more than 2% to end around 745 yuan a tonne (around $US103 a tonne).

The trigger was the statement issued late last week on Chinese social media from the China Iron & Steel Association (or CISA) calling on the country’s steelmaker “to take the initiative to reduce their production intensity to meet the needs of end-users while maintaining the balance between supply and demand.”

Chinese commodity websites said the Association was responding to the slide in prices (and demand) for steel products in the wake of the Lunar New Year holiday six weeks ago.

CISA pointed out that the domestic steel market and steel producers had been plagued by multiple factors including high levels of output, costs and inventories, alongside low demand, prices and efficiency.

Slowing demand from end-users has been the main reason for the persistent weakness in domestic steel prices, as China’s real estate market continues trending downwards and the infrastructure construction has also been sluggish recently.

The association then pointed out that the key is for steel mills to play a proactive role in balancing supply and demand in the market.

CISA suggested Chinese steelmakers schedule their production based on steel sales and business performance and pursue high-quality and effective development. Major steelmakers should take the lead in reducing ineffective supply, promoting the smooth running of the domestic steel market.

As well, CISA said Chinese steel mills should be “sensible about market fluctuations and strengthen management of their sales channels to prevent low-price dumping and vicious competition.”

CISA said that “China’s steel consumption has peaked, and the structure of steel demand has been evolving amid high-quality development and for now, Chinese steel producers should rationally monitor and analyse the market, adjust their pace of production based on market changes, and reduce steel inventories as soon as possible so as to achieve a dynamic matching of supply and demand, stated the proposal.”

Adding to the pressure on prices was the news that up to last Thursday, portside iron ore stocks had hit another multi-year high at 144.3 million tonnes.

The Mysteel commodities website – which surveys the 45 major Chinese ports – said the figure was the highest since late April 2022. The increase over the week was 654,000 tonnes – less than the 4 million plus rise the week before.

Despite the high level of stocks Mysteel said 23.5 million tonnes of ore arrived this ports last week, a small rise on the week before.