Iron Ore Slumps Below $55 as China Slowdown Hurts Outlook

Iron ore plunged below $55 a dry metric ton as signs of a slowdown in China’s economy added to concerns that demand will weaken from the largest buyer amid a global surplus.

Ore with 62 percent content at Qingdao, China, sank to $54.66 a ton on Friday, according to Metal Bulletin Ltd. That’s the lowest since at least May 2008, when Metal Bulletin started compiling weekly prices. Prices retreated 5.2 percent this week, extending losses in 2015 to 23 percent.

The raw material collapsed 47 percent last year as Rio Tinto Group, BHP Billiton Ltd. and Vale SA expanded low-cost output amid slowing demand growth in China, spurring a glut. Data this week showed China’s home prices dropped in more cities last month as an economic slowdown curbed demand even after the government removed property controls and lowered borrowing costs. Australia, the biggest exporter, said the commodity may average $60 this year as supplies increase.

“There’s room for iron ore prices to decline further,” Huang Huiwen, an analyst at Shanghai CIFCO Futures Co., said by phone on Friday. “China’s demand has slowed and the major seaborne producers are still raising output. The surplus shows no sign of easing at all.”

China set an economic growth target of 7 percent for this year, the least in more than 15 years, and flagged increasing headwinds that include a property slump and excess industrial capacity. New-home prices fell in 66 of the 70 cities tracked by the government, compared with 64 in January, the nation’s statistics bureau said on March 18.

Australia’s Outlook

Australia’s forecast of $60 a ton compares with a $63 estimate in December and $88 in 2014, the Department of Industry and Science said on March 18. The price projections refer to spot iron ore with 62 percent content free-on-board Australia.

China’s steel consumption growth is poised to remain lackluster through 2015, while an additional 111 million tons of output is forecast to enter the seaborne market, according to the department. Australia’s exports are set to climb to 792 million tons this year from 717 million in 2014, it said.

Steel output in China will shrink this year as demand has peaked, China & Iron Steel Association Deputy Secretary-General Li Xinchuang told a conference in Perth, Australia, last week, predicting a decline to 814 million tons from 823 million tons last year. Production will probably drop this year for the first time since the early 1980s, UBS Group AG said on March 10.

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