Most-active iron ore futures in Singapore sank below $40 a metric ton for the first time on concern that the economic slowdown in China will cut demand as supplies from the largest miners climb.
The SGX AsiaClear contract for January fell 3.1 percent to $39.51 a ton as of 10:33 a.m. in Singapore, heading for the lowest close since trading started in April 2013. On the Dalian Commodity Exchange, futures for May delivery sank as much as 3.1 percent to 293 yuan ($45.81) a ton, a record low.
The raw material used for steel has been pummeled since the start of 2014 as surging supplies from low-cost producers including BHP Billiton Ltd. and Rio Tinto Group in Australia and Brazil’s Vale SA combine with faltering demand in China to spur a glut. Losses in Singapore and Dalian could presage a drop in the benchmark price for spot iron ore in Qingdao, which will be updated later in the day. Port holdings in China rose to the highest since May last week.
“Supply continues to rise while port inventories are starting to climb, weighing on iron ore prices,” analysts at Maike Futures Co. said in a note on Monday. “The overseas producers are still profitable and are greatly reducing costs.”
The top miners are betting that higher output will enable them to cut unit costs and defend market share while smaller rivals shut. Mills in China, contending with overcapacity and depressed margins, will cut steel production by almost 3 percent next year, according to the China Iron & Steel Association.
Ore with 62 percent content delivered to Qingdao rose 1.2 percent to $44.50 a dry ton on Friday, according to Metal Bulletin Ltd. The price bottomed at $43.89 on Nov. 24, a record for daily price data dating back to May 2009.
Port inventories in China have expanded in six of the past seven weeks to the highest level since May. Holdings rose 1.8 percent to 87.65 million tons last week, according to Shanghai Steelhome Information Technology Co.
Source: http://www.bloomberg.com/