Iron ore extended its decline to the lowest since October 2009, posting the longest run of daily losses in two years, on concern global supplies are topping demand just as China’s recovery shows signs of faltering.
Ore with 62 percent content delivered to Qingdao, China slid 0.1 percent to $87.62 a dry metric ton today, dropping for a 10th day, according to Metal Bulletin Ltd. That’s the worst run since August 2012. The raw material used to make steel fell 8.4 percent this month, declining for four straight weeks.
Prices slumped 35 percent this year as producers including Rio Tinto Group (RIO) and BHP Billiton Ltd. expanded output, pushing the market into oversupply. Data this month showed an unexpected slowdown in China’s industrial output and home prices slumping in more cities in Asia’s largest economy. As some buyers were unwilling to take large amounts, that was forcing sellers to reduce prices, according to brokerage Sucden Financial Ltd.
“Iron ore demand appears to be cooling in China,” Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said by e-mail in response to Bloomberg questions before today’s price was released. “The usual seasonal uptick in Chinese demand will likely fail to materialize this year. Supply in the seaborne market also remains plentiful.”
Global seaborne output will exceed demand by 72 million tons this year and 175 million tons in 2015, Goldman Sachs Group Inc. estimates. The commodity will average $106 a ton this year and $80 a ton in 2015, according to Goldman.
The urgency for mills to restock isn’t compelling when port stockpiles are high and accessible and prices are low, Australia & New Zealand Banking Group Ltd. said in a report this week. Mills will adopt a wait-and-see approach as prices drop to see how low rates can go, according to Morgan Stanley.
Inventories at Chinese ports rose to 109.7 million tons as of Aug. 22, according to Shanghai Steelhome Information Technology Co. That’s 27 percent higher this year and near the record of 113.7 million tons set in July.
“Buyers are unwilling to purchase large amounts of cargo, which has in turn forced sellers to slash offers further,” said Kash Kamal, an analyst at Sucden Financial in London. “We could struggle with lower prices for the remainder of the year.”
The economy in China, which buys about 67 percent of seaborne ore, is set to expand this year at the slowest pace since 1990. Gross domestic product will probably grow 7.4 percent this year, according to estimates compiled by Bloomberg. The government has set a target of about 7.5 percent.
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