Seaborne iron ore prices collapsed on Monday as markets increasingly expected both higher US interest rates and missed Chinese GDP targets.
The Kallanish KORE 62% Fe index slumped $12.81/t to $138.54/dry metric tonne cfr Qingdao, the lowest level since a short-lived dip in mid-March. The Kallanish KORE 65% Fe index dropped $12.90/t to $162.30/dmt cfr, and the KORE 58% Fe index fell $10.10/t to $123.89/dmt cfr.
On the Dalian Commodity Exchange, September iron ore settled down CNY 60/t at CNY 830/t ($126.70/t), while on the Singapore Exchange May 62% Fe futures settled down $14.60/t at $136.17/t. The same contract for 65% Fe and 58% Fe futures settled down $14.53/t at $158.92/t, and down $12.56/t at $122.81/t respectively.
Chinese scrap and billet prices were also falling. 6mm+ heavy scrap delivered to mills in the Yangtze River Delta dropped CNY 25/t to CNY 3,916/t. In Tangshan, billet prices fell CNY 40/t over the weekend and CNY 50/t on Monday to CNY 4,700/t.
The bloodbath in iron ore mirrored a number of other financial and commodity markets, which are struggling to readjust to expectations of a possible global recession and further Covid-19 outbreaks in China.
In China, Beijing is now the focus of attention as growing case numbers there have triggered panic buying and fears of a lockdown. The country is only just beginning to escape the most serious economic consequences of lockdowns in the financial hub of Shanghai.
The addition of lockdowns in another major economic hub, plus any knock-on impacts of policymaking and the fear that Covid may continue to circulate through to at least the summer, have left financial markets very nervous. Chinese bankers continue to promote a stimulus agenda, but stimulus cannot be effectively implemented until Covid has eased.
Added to this is the fear that a rapid increase in US interest rates may trigger a global economic recession. At the very least, higher US interest rates are likely to draw funds away from commodity markets outside the US. The prospect of a German recession as it weans itself off Russian gas has added to fears that any aggressive move by the Fed may launch a wave of disruption globally.