Iron Ore Caps Weekly Drop on ‘Muted’ Chinese Post-Holiday Demand

Iron ore posted the first weekly loss in four amid lackluster buying from steel mills in China after a week-long national holiday and prospects for further increases in low-cost output by the largest suppliers.

Ore with 62 percent content at Qingdao, China, rose 0.3 percent to $62.56 a dry metric ton on Friday, according to data from Metal Bulletin Ltd. The price -- which sank to $61.20 on Feb. 9, the lowest on record dating back to May 2009 -- lost 1.4 percent this week.

The raw material extended losses this year after tumbling 47 percent in 2014 as surging supplies outpaced demand growth in China, the largest consumer. BHP Billiton Ltd., the world’s biggest mining company, said on Tuesday it expected prices to remain subdued as low-cost output rises further, boosting a glut. Mills in China cut steel production before and during the Lunar New Year holiday, which ran Feb. 18 to 24, and data on Friday showed that port stockpiles increased during the break.

“Chinese steel mills buying interest remains muted” after the Lunar New Year break, Australia and New Zealand Banking Group Ltd. said in a note on Friday. “Mills are holding off purchases as product inventories remain high and they wait for construction activity to pick up as the weather gets warmer.”

The global seaborne surplus will expand from 47 million tons this year to 260 million tons by 2018, according to Goldman Sachs Group Inc., which predicts prices will average $66 in 2015. Morgan Stanley said on Feb. 22 that the glut will surge to 437 million tons in 2018 from 184 million tons this year.

Restock Demand

Inventories at China’s ports climbed 3.2 percent to 99.15 million tons on Friday compared with Feb. 13, before the Lunar New Year holiday, Shanghai Steelhome Information Technology Co. said by e-mail. While the gain halted four weeks of declines, the port holdings are still 13 percent below a peak in July.

Prices may rise as mills buy after the break, according to UBS Group AG. High-cost mines in China that shut before the holiday may not reopen, boosting import demand, analyst Daniel Morgan said by e-mail on Feb. 10.

Output from major producers is set to rise. BHP kept a target for 225 million tons this fiscal year from 204 million a year earlier. Rio Tinto Group plans to boost output to 330 million tons this year from 295 million in 2014, while Vale SA in Brazil expects to produce 340 million tons this year.

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