Dalian iron ore futures sink further as spot hits five-year low

2014-11-20

China’s iron ore futures slid nearly 5 percent to a record low on Wednesday, piling more pressure on spot prices that have slumped to their weakest in more than five years as a supply glut hangs over the commodity.

Iron ore has lost nearly half of its value this year, hit hard by a slowing economy in top consumer China. Analysts are ruling out any Chinese restocking that typically supports prices in the last months of a year.

“We no longer expect a meaningful iron ore restock later in the year as steel mills in China are content to purchase iron ore at their convenience, either from the port or from domestic producers, due to its wide availability,” Commonwealth Bank of Australia said in a note.

“Tighter credit is also forcing many steel mills to adjust to lower inventory levels.”

Iron ore for May delivery on the Dalian Commodity Exchange fell as far as 4.7 percent to 469 yuan ($77) a tonne, its lowest since the bourse launched iron ore futures in October 2013. It closed down 3.9 percent at 473 yuan.

That adds to a 4-percent slide on Tuesday fuelled by data showing a deeper decline in China’s home prices in October. On the Singapore Exchange, the December iron ore contract was down 1.4 percent at $70.01 a tonne by 0706 GMT.

The benchmark spot iron ore price tumbled 4 percent to $72.10 a tonne on Tuesday, a level last seen in June 2009, based on data compiled by The Steel Index. It has fallen 46 percent for the year.

The housing data was the latest sign of economic weakness in China, where apparent steel consumption dropped 1.4 percent to 619.61 million tonnes in January-October, the China Iron and Steel Association said on Monday.

Stocks of imported iron ore at China’s ports rose for a second straight week to 108.75 million tonnes last week SH-TOT-IRONINV, according to consultancy SteelHome, although traders say some are trying to unload cargoes as prices skid.

“It’s near the end of the year and traders are trying to sell port cargoes to pay bank loans and that’s adding pressure on prices,” said a trader in China’s eastern Shandong province who is aiming to sell a 90,000-tonne cargo of Brazilian iron ore fines.

Outside of China, tug boat engineers at Port Hedland, Australia’s biggest iron ore port, plan to hold a four-hour work stoppage on Nov. 22, tug operator Teekay Shipping said, threatening exports from BHP Billiton and Fortescue Metals Group.

Source from : Reuters

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