Iron ore and coking coal futures slid to
six-week lows in Asia on Tuesday as China returned to business after the
eight-day holiday last week, and traders concluded that not much had changed.
The struggling property sector remains a concern, with concerted talk of
cutting steel production as Chinese mills struggle to maintain margins.
Other steelmaking ingredients were also under heavy pressure due to worries
about Chinese demand, with both coking coal and coke prices sliding by more
than 6%. Reuters reported that the most-traded January iron ore on China's
Dalian Commodity Exchange ended daytime trade 1.7% lower at 819 yuan
($US112.40) per tonne, hitting its weakest point since the end of August
earlier in the session at 812.50 yuan.
The benchmark November contract on the Singapore Exchange (SGX) dropped as much
as 2.7% to $US109.25 a tonne before settling around $US110 a tonne. It has
fallen about 9% from the previous quarter's peak of $US121.10. The news of the
price falls will impact shares in BHP, Rio Tinto, and Fortescue Metals on
Wednesday.
"Sentiment remained downbeat amid broader weakness in construction
activity in China," ANZ said in a note. "Unfavorable margins have
also raised the prospect of steel production cuts during winter."
Coking coal and coke on the Dalian Exchange sank 6.5% and 6.1%, respectively.
SGX Australian premium coking coal futures were down 2%.
"We do expect the supply situation to improve and demand to ease as
Chinese steel production moderates," Westpac said in its monthly outlook
for metallurgical coal.
There's renewed concern that China Evergrande, the most indebted of China's
private developers, is on the edge of total failure (it has already defaulted
on numerous debts, and attempts to restructure the company have been undermined
by police investigations and growing unease among foreign creditors).
China's Country Garden Holdings, the largest private developer still trading,
said on Tuesday that it might not be able to meet all of its offshore payment
obligations when due or within the relevant grace periods as it struggles with
debt restructuring.