Dalian iron ore futures slipped on Wednesday, pressured by a prolonged decline in Chinese steel prices and rising stocks of the steelmaking ingredient at the country’s ports.
Iron ore inventory at China’s ports rose 1.25 million tonnes to 86 million tonnes last week, the highest since late May, based on data tracked by industry consultancy SteelHome. SH-TOT-IRONINV
The rising stocks show slower demand for iron ore by Chinese steel mills hit by shrinking domestic consumption as economic growth weakens. “The steel price decline hasn’t stopped and a lot of steelmakers are facing losses so iron ore demand is declining,” said Wang Li, analyst at CRU Group in Beijing.
The most-traded January iron ore contract on the Dalian Commodity Exchange closed down nearly 1 percent at 345 yuan ($54) a tonne. It touched a four-month low of 342.50 yuan on Nov. 6. A global glut has dragged spot prices to below $45 a tonne this year, less than a quarter of record highs seen in 2011, forcing many high-cost producers out of the market.
“Chinese iron ore demand will be increasingly met by seaborne iron ore imports, as persistently low iron ore prices will force domestic production to come offline over the coming quarters,” BMI Research said in a report.
Rebar, a construction steel product, fell 1.2 percent to end at 1,777 yuan a tonne on the Shanghai Futures Exchange. The most-active contract swooped to a record low of 1,768 yuan last week. The disruption to shipments of iron ore from Brazil’s Samarco following the collapse of a tailings dam has had little impact on prices so far.
Samarco, 50-50 owned by Vale and Australian miner BHP Billiton , mainly produces iron ore pellets or high-grade material – typically products that China buys the least of in relation to its other ore purchases, according to Chinese customs data.
Vale said the disaster, which killed at least two and left 25 missing, will cut output at two nearby mines.