Dalian iron ore futures slip on concerns over market supervision

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Dalian iron ore futures declined on Tuesday on lingering fears of China’s supervision of the markets to ensure price stability, though analysts cautioned that the downward trend may be short-lived.

The most-traded January iron ore contract on China’s Dalian Commodity Exchange fell 0.4% to 966 yuan ($135.12) per metric ton at closing.

On the Singapore Exchange, the benchmark January iron ore rose 0.4% to $128.88 a metric ton.

State-backed Dalian Exchange announced on Nov. 30 its commitment to enhance supervision of the iron ore market for the safe and stable market operation. This came after the announcement on Nov. 24 that China will reinforce oversight and curb a price rally.

“What we have seen from the playbook in recent years from high-frequency announcements by Chinese authorities on elevated iron ore prices is that they tend to lose their effect after a while,” said Atilla Widnell, managing director at Navigate Commodities.

“Given that many of the investigations lack credible teeth, markets eventually ignore or discount these announcements.

“What’s more worrying for China both in the short and medium term is the divergence of the respective performances in domestic manufacturing and construction activity,” Widnell added.

China’s services activity expanded at a quicker pace in November, a private-sector survey showed on Tuesday, as the upturn in new businesses were the best seen for three months amid reports of firmer market conditions.

Taken together with the better-than-expected Caixin manufacturing PMI, China is showing signs of a recovery.

Steel benchmarks on the Shanghai Futures Exchange were down. The most-active rebar contract SRBcv1 slid 0.7%, hot-rolled coil SHHCcv1 dropped 1%, wire rod SWRcv1 decreased 3.3%, and stainless steel SHSScv1 lost 4%.

Other steelmaking ingredients Dalian coking coal DJMcv1 and coke DCJcv1 fell 3.4% and 1.6%, respectively.

The market awaits a batch of import and export data due this Thursday for direction.
Source: Reuters

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