Aug. 13 (Bloomberg) -- Iron ore sank to the lowest level in almost eight weeks as a credit gauge in China plunged, adding to risks that demand will slow from the world’s biggest buyer of the raw material.
Ore with 62 percent iron content delivered to Tianjin declined 0.9 percent at $93.20 a dry ton today, the lowest since June 20, according to data compiled by The Steel Index Ltd. China’s broadest measure of new credit slumped in July to the lowest level since the global financial crisis, central bank figures showed.
Prices tumbled 31 percent this year as mining companies from BHP Billiton Ltd. to Rio Tinto Group increased output, pushing the market into a glut. China, which purchases 67 percent of the seaborne ore, is forecast to expand this year at the weakest pace since 1990. The drop in financing resulted from recent regulation and financial institutions’ enhanced control of risks, the People’s Bank of China said today in Beijing.
“Banks are very cautious about metals financing deals so they have greatly reduced their exposure,” Helen Lau, a Hong Kong-based analyst at UOB Kay Hian Ltd., said by phone. “This may affect the demand for metal imports including iron ore. Seaborne prices will be under more pressure.”
Foreign and local banks are examining lending linked to metals at Qingdao port amid a probe into stockpiles traders used as collateral to get funding. The Chinese economy will probably expand at 7.4 percent this year, a Bloomberg survey shows. The government has set a target of about 7.5 percent.
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