Iron ore is headed for another poor week, capping another bad month in what’s shaping up to be another tough year as the world’s largest miners boost low-cost output while China’s steel demand contracts.
Prices are headed for a third straight weekly loss after dropping below $50 a metric ton and are 12 percent lower in October, on course for the biggest monthly fall since March. The commodity has fallen 30 percent so far this year after slumping in 2014 and 2013.
“We may see iron ore ultimately declining to between $40 and $45,” Dang Man, an analyst at Maike Futures Co. in Xi’an, China, said by phone on Friday. “Mills are expected to cut production. Once that happens, the effect of weakening demand will be felt more strongly in iron ore.”
This week iron ore breached a trading range of $50 to $60 that’s held for more than three months, pulled lower by the twin factors of surging supply from producers including Rio Tinto Group and weaker consumption in China. Steel demand is shrinking at an unprecedented speed and mills are losing money, according to the China Iron & Steel Association. Iron ore may stay below $50 for some time, Capital Economics Ltd. said, while Clarkson Capital Markets LLC sees an average of $47 this quarter.
Port Stockpiles
Ore with 62 percent content delivered to Qingdao fell 0.6 percent to $49.65 a dry ton on Thursday, the lowest since July 9, according to Metal Bulletin Ltd. Prices dropped as port stockpiles tracked by Shanghai Steelhome Information Technology Co. expanded to the highest level since May.
A weak steel market and oversupplied ore trade constrained buying interest this week, Morgan Stanley analyst Tom Price wrote in a note received Friday. Prices are under pressure as steelmakers tend to scale back production before the northern hemisphere winter lull, curbing demand, Price said.
Infrastructure development and housing growth in Asia will drive iron ore use, Andrew Harding, chief executive of Rio’s iron ore division, was quoted as telling In The Black magazine. While China has had short-term hiccups, the company sees a few decades of strong development across Asia, Harding told the magazine.
“The major producers’ supply expansion will remain a long-term factor -- they’re still ramping up output -- and demand is very poor,” said Dang at Maike. “From the perspective of shipments and port inventories, there’s hardly any support for prices.”
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