Chinese Cold Snap Ending Seen Fueling Iron-Ore Price Retreat

The price of iron ore in China, at the highest in more than 14 months, will fall in the second half of 2013 as the country’s mines ramp up output that was curbed by the coldest winter in 28 years, Credit Suisse Group AG said.

Mills in China, the biggest iron-ore users, are restocking through December and January amid an improved outlook for construction, infrastructure activity and manufacturing in the country, the investment bank said an e-mailed report today. Mines in China that ran short of capacity last year will boost production from March, according to Credit Suisse.

“China’s domestic mine supply has been unable to respond through price-induced reactivations as China suffers its coldest winter snap in almost 30 years,” the bank said. Resumed output will probably “fuel a retreat in prices in the second half of 2013 as supply once again catches up with demand.”

The price of ore with an iron content of 62 percent landed in Tianjin, a Chinese port, fell 0.2 percent to $158.20 a dry metric ton today, according to The Steel Index Ltd. The price has gained 82 percent since plunging a near-three year low of $86.70 in September.

“This new-found buoyancy will not last beyond the first half of the year, and shorter-term price corrections, in line with increased volatility, are quite possible,” the report said.