Chinese iron ore futures snap 3-day rise after PMI drops

2014-12-02

Iron ore futures in China dropped on Monday, ending a three-day rally after surveys showing the country’s manufacturing activity slowed to multi-month lows, further evidence of weakness in the world’s second-biggest economy.

The surveys gave investors another excuse to sell risky assets and the commodities sell-off continued, with oil extending a months-long rout and copper sliding to its weakest since 2010.

The HSBC/Markit China Purchasing Managers’ Index hit a six-month low of 50 in November and a separate government reading put the PMI at just above 50, the lowest in eight months.

Iron ore for May delivery on the Dalian Commodity Exchange was down 1.2 percent at 479 yuan ($78) a tonne by 0249 GMt, after falling to 470 yuan earlier.

Iron ore futures on the Singapore Exchange also retreated, with the January contract sliding more than 2 percent.

Demand for spot iron ore cargoes in China was lean as winter slows construction activity, trimming steel consumption, traders said.

“The temperature dropped very fast this weekend in Shanghai and it’s even colder in the northern part of China. We’re getting feedback from mills that sales remain weak,” said an iron ore trader in Shanghai.

Benchmark 62 percent grade iron ore for delivery to China’s Tianjin port .IO62-CNI=SI was up 10 cents at $69.80 a tonne on Friday, according to The Steel Index.

Iron ore gained nearly $2 on Thursday after falling to $68 in the previous session, its lowest since June 2009.

Expectations that China may move further to stimulate a slowing economy have helped sentiment in the iron ore and steel sector, Australia and New Zealand Banking Group said in a note.

“However, benefits from such moves may not spill over into the steel sector, with credit conditions set to remain tight for steel mills for some time,” ANZ said.

After months of more modest stimulus measures, China unexpectedly cut interest rates on Nov. 21, stepping up efforts to support the economy as it heads towards its slowest expansion in nearly a quarter of a century.

A decline in iron ore stockpiles at China’s ports helped limit losses in futures. The inventory of imported iron ore at major Chinese ports dropped 1.75 million tonnes to 107.55 million as of Nov. 28, after a three-week increase, data from industry consultancy SteelHome showed.

Source from : Reuters

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