The looming possibility of a trade war between China and the US has decimated confidence on the steel and ore derivatives market, sending prices tumbling.
The Chinese steel and ore derivatives market dived on the news that US President Trump had signed the tariffs memorandum against China.
The most-traded rebar contract on the Shanghai Futures Exchange for May delivery closed down Yuan 250/mt day on day at Yuan 3,369/mt ($571/mt),and last settled at Yuan 3,460/mt, down Yuan 163/mt over the same period.
The most active May hot-rolled coil contract plummeted by Yuan 211/mt or 5.6% day on day to Yuan 3,536/mt Friday.
Iron ore futures trading on the Dalian Commodity Exchange also dived, with the most liquid May contract last traded at Yuan 437.5/dmt ($69.15/dmt), down 29/dmt (6.22%) on day, and settling at Yuan 447.5/dmt, down Yuan 20/dmt over the same period.
A Zhejiang trader said that escalating tensions between China and US were hitting hard on market confidence and on steel market fundamentals, as this might escalate into a trade war.
"DCE Iron ore futures have hit the allowable limit for the day, while Shanghai Rebar futures is collapsing too," a Zhejiang trader said. "Panic is spreading in the market."
The bearish sentiments had also spread to the physical market.
"China's steel market has been bearish for weeks, and this just makes the market even weaker," a Chinese steel mill source said, adding that the market should remain bearish in March.
However, as China's steel export volume to the US is limited, the market is likely to return to being rational later, the source said.
Most Chinese mills and traders stopped quoting bids or offers Friday.
"There is no meaning offering right now, as buyers are all in wait-and-see mode. We shall wait until next Monday or Tuesday when there is a clearer picture of the market," another mill source said. "It seems no bid, as buyers expect prices to go down further", a Tokyo-based billet trader said.
Another mill source in eastern China said the market has over-reacted to the trade tension between the two countries.
