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Iron Ore Seen Falling in Second Quarter as China Restocking Ends

Iron ore will almost erase the past two months’ rally and fall 19 percent in the second quarter as weather stops disrupting supply and Chinese restocking ends, according to a Barclays Plc trader of the commodity.

The raw material used to make steel will average $120 a dry metric ton in the three months from April, said Richard Lee, who most accurately predicted Chinese ore imports in a September survey of 11 analysts, traders and brokers. Iron ore traded at $147.70 a ton yesterday, prices from The Steel Index Ltd. show. Second-quarter swaps to bet on, or hedge, prices are trading at about $136 a ton, according to data from SSY Futures Ltd.

Iron ore rebounded as much as 83 percent since plunging to an almost-three-year low in September, according to the Steel Index. China, the world’s biggest importer, is rebuilding inventories before the Lunar New Year, and storms closed ports in Australia, the largest supplier. The rally will end next quarter as underlying steel demand remains weak, Lee said.

“Supply is tight due to weather, and restocking demand should hold for next month or so, but once these subside into spring it could expose steel demand as rather soggy still,” Lee said by e-mail yesterday. “Firm Chinese growth numbers, while positive for the macro economies, are not very encouraging for stimulus.”

China’s economic risks have shifted back to growing too quickly as new regional-government officials try to boost development, Fan Gang, a People’s Bank of China academic adviser from 2006 to 2010, said yesterday in an interview in Davos, Switzerland, where he is attending the World Economic Forum.

Ore with 62 percent content at the Chinese port of Tianjin, which rallied to a 14-month high of $158.50 a ton on Jan. 8, has declined 6.8 percent since then, Steel Index data show.

Record Imports

Chinese imports rose to a record 70.9 million tons in December, customs data show. Inventories dropped 28 percent since September to 69.7 million tons, the lowest since 2010, according to Beijing Antaike Information Development Co. The world’s second-largest economy is accelerating after seven quarters of slowing growth.

Harbor masters reopened the Australian ports of Cape Lambert, Dampier and Port Hedland yesterday after a tropical cyclone had forced ships to stop loading. Interruptions linked to weather are likely in coming months, Oslo-based investment bank RS Platou AS said in an e-mailed report yesterday.

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

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