Iron ore prices dropped to their weakest level since 2009 on Tuesday and look poised for further losses as a supply glut keeps pressure on the commodity, which has fallen 42 percent this year.
China’s looming winter, which in past years has increased steel mills’ appetite for imported iron ore, is unlikely to provide a fresh boost to prices with many domestic mines shut, traders said.
“Many mills have already shifted to using more imported iron ore because of the slump in prices this year so I don’t see that the additional demand during winter will be much higher,” a Shanghai-based iron ore trader said.
The slump in prices has forced many high-cost ore mines in China, the world’s top iron ore importer and consumer, to close as top producers from Australia and Brazil boost production to record levels to ship more to China.
Australian shipments of iron ore to China from Port Hedland, which handles about a fifth of the world’s seaborne trade, rose 6.5 percent to a near-record 31.71 million tonnes in October, port data showed.
Iron ore for immediate delivery to China fell 0.9 percent on Tuesday to $77.10 a tonne, its lowest since September 2009, according to data compiled by The Steel Index.
Iron ore futures edged lower, with the most-traded May contract on the Dalian Commodity Exchange closing down 1.3 percent at 520 yuan ($85) a tonne. The January contract on the Singapore Exchange slipped 0.2 percent to $76.74 a tonne.
APEC AND SMOG
“Demand remains weak as Chinese buyers sit on the sidelines with many steel mills forced to halt production leading up to the APEC meeting,” ANZ Bank analysts said in a note.
Dozens of steel mills in industrial areas straddling the capital Beijing have shut from Nov. 1 to cut smog before leaders, including U.S. President Barack Obama, attend the Nov. 5-11 Asia-Pacific Economic Cooperation meeting.
China imposed similar shutdowns on industry during the 2008 Beijing Olympics.
The bulk of the shutdowns were in Hebei, which accounts for around 30 percent of China’s steel capacity. But Cao Bo, analyst at Jinrui Futures in Shenzhen, estimates that only 7 percent of the province’s output will be shut during the APEC meeting.
“That means only about 3 percent of China’s total production will shut down. The effect on output is very, very small,” Cao said.
The most-active rebar for May delivery on the Shanghai Futures Exchange eased 0.2 percent to end at 2,558 yuan a tonne, off a session low of 2,529 yuan.