In an indication that further weakness in the spot price may arrive this evening, Chinese iron ore futures continued to tumble overnight with the most actively traded January 2016 contract on the Dalian Commodities Exchange falling 0.97% to 357.5 yuan. In addition, international iron ore traders continually expanded shipment to the spot market though against the background of a few domestic steel enterprises' seasonal reduction of steel production. China's steel industry continued to struggle in the first nine months of the year, as consumption slumped, prices hit a record low, and oversupply remained a major problem despite a fall in output, an industry body said Wednesday. "Any downward room, however, will be small as mines turn reluctant to lower price further", SMM explains. Shanghai Baosteel Group Corp forecast last week that China's steel production may eventually shrink 20%, matching the experience seen in the United States and elsewhere.
"As demand quickly contracted, steel mills are lowering prices in competition to get contracts", Zhu Jimin, deputy head of the China Iron & Steel Association, said on Wednesday at a briefing in Beijing, according to Bloomberg. "China's steel demand evaporated at unprecedented speed as the nation's economic growth slowed". But data for the first nine months of 2015 shows that the steel industry in China is finally contracting. Of course, all these developments are negative for the global seaborne iron ore market. Iron ore bottomed this year at $US44.59 on July 8. The Financial Times, citing investment bank Macquarie, noted in its report that following the drop in prices, China is buying more iron ore from Australia instead of smaller suppliers. The biggest beneficiaries of this trend, of course, the Australian mining giants, BHP Billiton and Rio Tinto. In 2014, the company delivered 200 million tons of iron ore to China. Meanwhile, the stockpiles of iron ore located in the ports of the world's second largest economy went up to the highest levels since May.
Source: http://financialspots.com/