China stock plunge hammers steel feedstocks
The Argus ICX, the price for 62pc iron ore fines cfr China, fell by 10.7pc or $5.15/t to $42.95/t today, the largest percentage one-day move and lowest level since Argus launched the index in 2013. Iron ore prices have now fallen by 31pc from $62.20/t at this time last month.
The Shanghai Composite Index closed down 5.9pc today and has lost 32pc of its value since hitting a peak in four weeks ago, despite unprecedented government interventions in an attempt to halt the declines.
"The stock market is leveraged long, so a lot of people are going to unwind on any rally or be forced to liquidate," a Singapore-based international coking coal trader said. "That market is scary. I am just glad I am not holding any Shanghai equities."
Tangshan billet ex-works prices were cut twice late in the day, dropping by a total of 50 yuan/t to Yn1,670/t ($269/t).
"It is panic mode," a Singapore-based iron ore trader said.
"Mills are seeing losses of more than Yn200/t, except for those that produce specialized steel and plate rolling steel," a Tangshan-based mill manager said. "We tried to promote billet sales at Yn1,720/t and Yn1,690/t, but failed. The bearish steel market is already beyond our expectation. We are in an unprecedented situation now."
Nearly half of the stocks listed in Shanghai and Shenzhen have suspended trading.
The China Securities Regulatory Commission has attempted to support markets by banning state-controlled companies from selling their listed shares. State-backed China Securities Finance has begun buying up stocks, backed by central bank the People's Bank of China.
"There is panic sentiment and a large increase in irrational selling, which has tightened liquidity," a commission spokesman said.
Traders are divided on what effect the stock market losses will have on the economy, and whether the government will be able to reverse declines.
"The real economy is already bad, now the stock market is just as bad as the real economy," a Chinese steel trader said. "But the horror we see on the stock market will not pass to the real economy." He expects the economy will stabilise with government intervention.
An international coking coal trader expects stimulus measures to have limited effect on feedstocks. "I think we will see another credit easing, but I do not think it is going to have much impact on the spot market."
The most-active Chinese iron ore futures contract fell for the ninth consecutive session, dropping by 7.9pc to Yn349/t, the maximum decline allowed after it hit down limits of 4pc and 6pc in the previous two days. The most-active rebar futures contract fell by 4.3pc to Yn1,828/t, coking coal fell by 2.8pc to Yn621.50/t and for met coke fell by 3.4pc to Yn816/t.
"The market has lost its mind and just keeps falling," a Chinese futures trader said.
"Futures plunging sharply over the past two days has negatively affected coking coal and metallurgical coke markets," another Chinese coking coal trader said.
"It is difficult to see prices for feedstocks rebounding this week with no buying interest in the market," a Chinese coking coal trader said.
Комментарии