Iron ore extended losses to the lowest level in more than five years amid concern that slowing steel demand in China may hurt consumption in the world’s biggest user just as rising supplies deepen a glut
Ore with 62 percent content delivered to Qingdao, China, dropped 1.6 percent to $66.84 a dry metric ton, according to data compiled by Metal Bulletin Ltd. That’s the lowest since June 2, 2009.
The raw material used to make steel collapsed 50 percent this year as BHP Billiton Ltd. (BHP), Rio Tinto Group and Vale SA (VALE5) expanded output, spurring a surplus. A property downturn and excess capacity have set China on course for the slowest full-year expansion since 1990. Australia, the top exporter, this week cut its price estimate for next year by 33 percent.
“Things really look bleak,” Dominic Schnider, an analyst at UBS Group AG’s wealth-management unit in Singapore, said in a Bloomberg Television interview yesterday. “There’s not much of support actually even in 2015. China is still going to decelerate.”
The world’s second-biggest economy may cancel tax rebates for some steel product exports because of international pressure over potential dumping practices, Shanghai Securities News reported today, citing an official from the China Iron and Steel Association. A plan to adjust rebates has been submitted to the ministries and may be introduced in the first half, it said.
Australia sees the commodity averaging $63 next year compared with a $94 forecast in September, as surging output outpaces Chinese demand growth, the Department of Industry said yesterday. Projections refer to spot ore with 62 percent content free-on-board Australia.
The market needs to absorb a surplus of about 110 million tons next year, almost double the 60 million tons in 2014, Goldman Sachs Group Inc. estimated in October. The bank forecasts a price of $80 next year.
Source: Bloomberg
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