The most-active coke contract, also with January 2020 expiry, dropped 1.1% to 1,963 yuan a tonne its lowest close in nearly five months. BHP, the world's biggest miner, has warned global economic headwinds, such as the US-China trade war, could hit demand for its key commodities, including iron ore.
BHP expects average benchmark prices for steelmaking raw materials to be lower in financial year 2020 versus 2019, although it said prices are likely to remain above long-run marginal cost amid global supply disruptions. Seaborne iron ore supply conditions for the remainder of 2019 and next year are "highly uncertain, both in aggregate and in terms of quality profile", BHP said in its latest economic and commodities outlook.
"(BHP's outlook) suggested the market could see considerable volatility in prices ahead as the market continues to adjust to supply disruptions," ANZ Research said in a note. Reduced iron ore shipments to China after a tailings dam disaster in Brazil in January and a cyclone in Australia, while Chinese steelmakers continued to ramp up output, lifted spot prices of the raw material to five-year peaks in recent months.
Prices have pulled back in recent weeks as shipments to China has rebounded, while steel demand is seasonally weak and output restrictions are in place in some steelmaking hubs, but they remain well above 2018 levels. The most-active September 2019 iron ore contract on the Singapore Exchange slumped 5.8% to $81.42 a tonne in late trade.
"Buoyant iron ore pricing is not expected to continue into FY20 so the focus now turns to BHP delivering on the cost out and volume growth promised," UBS said, after the miner posted its largest annual profit in five years and record full-year dividends on Tuesday. Benchmark spot 62% iron ore for delivery to China settled at $91.50 a tonne on Tuesday, from Monday's $92.50.
The construction steel rebar benchmark on the Shanghai Futures Exchange dropped 1.1% to 3,686 yuan a tonne. Hot rolled coil, steel used in cars and home appliances, edged down 0.2% to 3,720 yuan a tonne.