Spot iron ore prices hit their lowest since September 2012 on Tuesday as swelling supplies weighed, while China's Dalian iron ore futures rebounded after a six-day slide that dragged the price down to the lowest level since last year's launch.
Benchmark 62 percent grade iron ore for immediate delivery to China .IO62-CNI=SI fell 0.3 percent to $88.90 a tonne, the lowest in nearly two years, according to data compiled by Steel Index.
Demand from China, which buys around two-thirds of the world's iron ore, remains firm, as shown by its strong imports of 82.5 million tonnes in July, the third highest monthly volume on record.
But the market is awash with the raw material used to make steel.
Iron ore for delivery in January on the Dalian Commodity Exchange closed up 0.8 percent at 648 yuan ($105) a tonne. The most active contract fell to 639 yuan on Monday, the lowest since the Dalian bourse launched the futures last October.
Top miners such as Vale, Rio Tinto and BHP Billiton remain bent on boosting supply, convinced their low-cost business model will prevail over higher-cost producers, including those in China.
But China's raw iron ore output has continued to increase, with production in January-July up 9 percent at 849.4 million tonnes, according to government data released this month.
While many small and medium-sized Chinese mines have shut down, their total output "accounts for only a small part of the aggregate production", said Cao Bo, an analyst at Jinrui Futures in Shenzhen.
"Besides, a lot of new mines came to operation in the past half year. The newly released capacity replaced those that were shut down," he said.
While offers for seaborne iron ore cargoes in the spot market remained high, bids were scarce and some sellers were waiting for prices to bounce back, traders said.
"Traders are having difficulty selling because their existing stocks were bought at higher prices. Some traders are trying to sell their cargo and some are holding back," said a Shanghai-based iron ore trader.
In steel, the most traded January rebar contract on the Shanghai Futures Exchange rose 0.3 percent to end at 2,979 yuan a tonne after falling to a record low of 2,961 yuan in the previous session.
Source: Reuters
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