Iron Ore Reserves Seen Gaining by JPMorgan as BHP, Rio Drop

Iron ore stockpiles held at China’s ports are starting to recover as production increases and that probably means lower prices, according to JPMorgan Chase & Co.

The holdings rose 2.8 percent last week to 81.55 million metric tons, rebounding from the lowest since 2013 to post the first increase since April, according to Shanghai Steelhome Information Technology Co. The stockpiles fell in the three months to June, supporting a rally.

“We expect shipments to start to rise,” Daniel Kang, an analyst at JPMorgan in Hong Kong, said by phone on Monday. “Inventories should start to pick up again and will increase. That should in turn put some pressure on iron ore.”

The holdings, which are tracked as one gauge of demand in the largest user, contracted 21 percent in the second quarter after shipments missed expectations, helping to spur a 16 percent climb in benchmark prices. Data last week showed record exports through Australia’s Port Hedland in June and a rise in cargoes from Brazil to the highest this year, signaling that the top producers including BHP Billiton Ltd. and Vale SA remain intent on boosting supply even as demand in China slows.

Ore with 62 percent content delivered to Qingdao lost 11 percent last week to $55.26 a dry ton, the lowest since April 23, according to Metal Bulletin Ltd. Prices were seen at $53 in the third quarter and $50 in the fourth, according to Kang.

Producers’ shares tumbled in Sydney on Monday. Fortescue Metals Group Ltd. sank 5.8 percent to A$1.715, the lowest close since 2009 and BHP fell 2.2 percent to A$26.01. Both ship cargoes through Hedland. Rio Tinto Group lost 2.6 percent.

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