Iron ore slipped and stayed close to its weakest level since September 2012 at below $100 a tonne amid brisk supply and slow buying interest for spot cargoes among Chinese mills that has cut prices by nearly a third this year.
Tighter access to lending in China, the world’s top importer of iron ore, also weighed on the market, traders said, as banks tidy up their financials with the end of the first half of the year approaching.
“Many buyers are not able to open letters of credit at this time and this liquidity issue is partly why we’re not seeing a lot of buying activity in the spot market,” said an iron ore trader in Shanghai.
“It’s not easy to do business right now.”
Iron ore with 62 percent iron content for immediate delivery to China .IO62-CNI=SI fell 0.7 percent to $93.60 a tonne on Tuesday, according to data compiler Steel Index.
The steelmaking raw material fell below $100 a tonne on May 19 and has since stayed below that level, touching a bottom of $91.80 on May 30, its lowest in more than 20 months. Iron ore has dropped more than 30 percent this year.
In China, iron ore futures slipped for a second session on Wednesday. The most-traded contract for delivery in September on the Dalian Commodity Exchange was off 0.4 percent at 682 yuan ($110) a tonne by midday.
The current price levels below $100 a tonne are forcing smaller iron ore producers in China to shut down, and displaced by imported material, particularly from bigger miners overseas who can afford lower prices, Australia and New Zealand Bank said in a note.
The production cost for Chinese iron ore miners reached $75 to $145 a tonne last year, the country’s National Development and Reform Commission said in late May. In comparison, the average global iron ore production cost was $54.70 a tonne last year.
TOUGH TIMES
Still, some Chinese traders are finding it tough to sell cargoes at the moment.
“We have 550,000 tonnes that we are trying to sell but it’s difficult to get a good price,” said a trader in Rizhao in China’s Shandong province.
A potential strike by workers in Australia’s Port Hedland which could halt a quarter of global iron ore exports may support prices, although analysts say it would depend on how long it would be.
Tugboat engineers at Port Hedland backed plans for possible strike action in a fight for more leave and shorter work hours with the next mediation sessions set for June 12 and July 3.
The strike may impact shipment of an average 1 million tonnes per day, Standard Bank analyst Melinda Moore said, but added “it remains difficult to ascertain whether a strike will occur and for how long.”
Baoshan Iron and Steel, China’s biggest listed steelmaker, said it will keep prices of its main products unchanged for July bookings after slashing them in the two previous months.
Steel demand slows along with construction activity during China’s summer season that begins in June.
Rebar for October delivery on the Shanghai Futures Exchange , the most-active contract, slipped 0.3 percent to 3,053 yuan a tonne.