ANZ Says Chances Growing Daily of Iron Ore Sliding Below $35

  • Iron ore will probably retest recent lows in coming weeks
  • Prices bottomed at $38.30 last month, more than six-year low

Iron ore may tumble below $35 a metric ton as steel mills in China face weak demand at home and increasing barriers to exports, according to Australia & New Zealand Banking Group Ltd.

The steel-making raw material will remain weak through March and trade between $35 and $40, the bank forecasts in an e-mailed report Tuesday. The probability of prices declining below this range in the short term is “rising daily”, ANZ said.

Steel demand in China is weakening as policy makers seek to steer the world’s second-biggest economy away from investment-led growth to a model driven by consumer demand and services. That’s hurt consumption of iron ore, contributing to a 39 percent collapse in prices last year, even as the top miners in Australia and Brazil pressed ahead with supply expansions. Determined to maintain steel output amid scant demand at home, mills have flooded the world with exports, exacerbating trade frictions.

“A still-weak macro environment will put further downward pressure on steel and iron ore prices,” ANZ analysts Daniel Hynes and Anurag Soin wrote. “As such, iron ore prices are likely to retest recent lows over the coming weeks.”

Price Slump

Ore with 62 percent content delivered to Qingdao retreated 2 percent to $41.31 a dry ton on Monday, dropping for a fifth straight day, according to Metal Bulletin Ltd. The commodity bottomed at $38.30 on Dec. 11, a record low in daily prices dating back to May 2009.

Capital Economics Ltd. is predicting a wild ride for iron ore this year as it sees prices swooning into the $20s before rallying to end the year higher. Goldman Sachs Group Inc. has said the raw material will probably remain under $40 for the next three years as the slowdown in China, where steel consumption is contracting, forces the global industry into hibernation.

Inventories of iron ore at Chinese ports have expanded in six of the past seven weeks. Holdings rose 0.4 percent to 93 million tons last week, according to data by Shanghai Steelhome Information Technology Co.

The SGX AsiaClear contract for April fell 0.9 percent to $34.77 a ton by 3:23 p.m. in Singapore. On the Dalian Commodity Exchange, futures for May delivery sank 1.6 percent to close at 300.5 yuan ($45.70) a ton, the lowest in about three weeks.

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