Iron Ore Set for Worst Month Since October on Slowdown Concerns

Iron ore headed for the worst monthly performance since October amid concern that slowing global economic growth and Europe’s sovereign-debt crisis may curb demand for the raw material used in steelmaking.

Iron ore with 62 percent content delivered to the Chinese port of Tianjin was little changed at $139.90 per metric ton yesterday, data from The Steel Index showed. The price is up 1 percent this month after falling 31 percent in October and rebounding 11 percent in November and 5.8 percent last month.

China, the largest steelmaker, boosted annual output by the slowest pace in three years in 2011 as the nation’s economy cooled last quarter, cutting demand from makers of houses and autos. European leaders are sparring with Greece over a second rescue program, leaving a Brussels summit yesterday with no accord over how to plug the nation’s widening budget deficit.

“World growth is going to be a bit subdued, and very anemic in Europe, so there’s not going to be any push for stronger iron ore prices,” said Michael Heffernan, a Melbourne- based client adviser at Austock Securities Ltd. “You’re not going to see iron ore prices skyrocket.”

This month the International Monetary Fund lowered its estimate for global economic growth this year to 3.3 percent from a September forecast of 4 percent, while the expansion next year will be 3.9 percent. The euro area may shrink 0.5 percent as the U.S. expands 1.8 percent, the IMF said on Jan. 24.

First-Half Outlook

Iron ore prices may be “softer” in the first half before demand picks up in the second, Anglo American Plc (AAL) Chief Executive Officer Cynthia Carroll said on Jan. 27. The London- based company produced 12.4 million tons of iron ore in the fourth quarter, an increase of 5 percent.

China’s crude steel production gained 8.9 percent last year to a record 683.3 million tons, the National Bureau of Statistics said on Jan. 17. Annual production gained 10 percent in 2010 and 13 percent in 2009, after climbing 2.3 percent in 2008, according to the China Iron and Steel Association.

Angang Steel Co. (347), the biggest Hong Kong-traded steelmaker, fell to a loss of 2.15 billion yuan ($339 million) last year, according to an estimate in a statement to the Hong Kong stock exchange yesterday. Maanshan Iron & Steel Co. and Nanjing Iron & Steel Co. said yesterday that their annual profits fell by more than 50 percent on weaker demand and lower prices.

Prices for hot-rolled coil in China, a benchmark steel product, fell 8.6 percent in the last quarter of 2011, according to Antaike Information Development Co.

“Next year will be a much better year for world economic growth,” Heffernan said. “The worst of Europe is behind us. There were quite a few unforeseen events that happened last year that I don’t think are going to be repeated.”

To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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