Iron Ore Drops to Seven-Week Low Amid China-Financing Concern

Iron ore retreated to the lowest level in almost seven weeks, heading for a fifth monthly loss, amid concern that demand in China may be hurt should banks tighten requirements for funding imports.

Ore with 62 percent content delivered to Tianjin fell 2.2 percent to $108.60 a dry ton yesterday, the lowest level since March 12, according to The Steel Index Ltd. The benchmark price has lost 19 percent this year on prospects for increased global supplies and as holdings at China’s ports swelled to a record.

Banks will raise deposits required for letters of credit used to finance purchases from May 1, the Guangzhou-based Southern Metropolis Daily reported yesterday. The China Banking Regulatory Commission has issued a statement asking banks to report exposure against iron ore import financing and warned them about the risks, according to Market News International. The country is the world’s largest importer of the commodity.

“This could limit imports going forward and reduce the demand for iron ore in financing,” said Daniel Kang, a Hong Kong-based analyst at JPMorgan Chase & Co. “That may have some pressure on prices but it will be limited in the short term, given that we’ve got seasonally stronger demand conditions in the second quarter.”

The report in the Southern Metropolis Daily cited people that the newspaper didn’t identify. The Beijing-based China Banking Regulatory Commission declined to comment yesterday when reached by Bloomberg News via phone.

‘Nothing Wrong’

“I don’t think it’s a big issue,” said Tom Price, an analyst at UBS AG in Sydney. “One of the weird things we’re seeing in the market is that there’s nothing wrong with downstream demand for iron ore or steel-processing capacity in China or even across Asia.”

Stockpiles at ports in China rose 1.4 percent to a record 109.55 million metric tons in the week to April 25 from a week earlier, according to Shanghai Steelhome Information Technology Co. Inventories climbed 25 percent this year.

Shipments into China, which accounts for more than 60 percent of global seaborne trade, were a record 820 million tons last year, according to an estimate from the China Iron & Steel Association. Imports rose 19 percent to about 222 million tons in the first quarter, China’s customs said on April 10.

Australia’s dollar fell 0.2 percent to near a three-week low at 11:36 a.m. in Sydney after the drop in ore prices. Shipments from the world’s largest exporter will rise 19 percent to a record 687 million tons this year, Australia’s Bureau of Resources and Energy Economics forecast last month after iron ore entered a bear market.

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To contact the editors responsible for this story: James Poole at Jake Lloyd-Smith, Sungwoo Park

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