The ferrous market declined suddenly today, out of expectations of industry participants. There were no major negative factors on steel products or iron ore, based on recent high frequency data. The destocking of HRC progressed well; rebars were restocking but total inventory was at the low level. We were expecting the market to adjust and get prepared for winter stocking, the capital came in and opened short positions.
The negative sentiment was said to have come from the equities market. There were market talks online about “cases were filed on illegals recommending stocks”, “no ‘mad bull’ but ‘slow bull’”, “restricted purchase on ST stocks”, and etc, and got more attention today, pressuring the equities market thus commodities market. Trump’s impact remains in the global market, with a surging dollar and weakening commodities. Gold and oil, which rose the most this year, started to fall.
Iron ore was weak under above circumstances, especially on a Friday, but sellers were reluctant to sell. The spot steel products also crashed today, but the price spread between steel products and iron ore turned stronger.
A relatively strong spot market indicates that the market disagrees with the price fall. We expect prices to rebound after this round of retreat.
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