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Iron Ore Hit as Investors See Lower China Demand, Rising Output

Updated on
  • Commodity set for monthly loss as top buyer orders mills shut
  • Bernstein says miners will raise supplies 5.3% this quarter

Iron ore’s on the back foot as the raw material closes out a brutal month. Futures in China sank to the lowest since June amid concern the market is getting caught between rising supply as miners crank up output and lower demand, with China enforcing mill closures to curb pollution.

On the Dalian Commodity Exchange, most-active futures fell 4.7 percent to 451 yuan a metric ton, the lowest close since June 26, and 21 percent lower this month. In Singapore, SGX AsiaClear futures also slipped. Spot ore with 62 percent content in Qingdao fell 2 percent to $62.89 a dry ton on Thursday, down for the fifth time in six days, according to Metal Bulletin Ltd.

Benchmark ore sank into a bear market last week amid speculation China’s planned winter clean-up campaign, including curbs on local iron plants as well as mills, will lower demand. At the same time, miners are adding shipments, bolstering supplies. Goldman Sachs Group Inc. has warned even though China’s demand for steel remains robust, prices may extend declines.

“With steel output cuts curbing iron ore demand, prices will fluctuate under downward pressure,” Maike Futures said in a note on Thursday. Prices of the raw material are now falling near to cost as overseas producers are in peak export season, leading to a rebound in supplies, according to Maike.

The latest estimate of rising worldwide shipments came from Sandford C. Bernstein & Co., which tracks cargoes by vessel every week from producers including Vale SA, Rio Tinto Group and BHP Billiton Ltd. Global exports from top miners will probably increase 5.3 percent to 315.1 million tons this quarter, Bernstein said.

— With assistance by Jake Lloyd-Smith

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