SINGAPORE/SHANGHAI, May 17: Spot iron ore prices sagged to their weakest level in more than five months and are under pressure to fall further as slower steel demand in top consumer China dampens appetite for the raw material.
The price of iron ore, the top money spinner for global miners Vale and Rio Tinto , has fallen 21 percent from February’s 16-month high as a tepid economic recovery in China curbs its demand for steel.
‘The market is all negative sentiment now, and a few steel mills in northern China have almost suspended buying iron ore,’ said a Shanghai-based iron ore trader.
‘If demand is soft during a typical strong consumption season, what happens during the weak consumption season then?’
The second quarter is normally the busiest period for China’s steel market with construction activity typically in full swing. But declining steel prices and rising stockpiles of steel products have suggested otherwise this year.
Iron ore with 62 percent iron content <.IO62-CNI=SI>, the industry benchmark, fell 1.1 percent to $125 a tonne on Thursday, a level last hit on Dec. 12, according to data compiler Steel Index.
The price of iron ore has dropped for the past five trading days and is down 3.5 percent so far this week, its fourth loss out of five weeks.
Shanghai rebar futures on Friday fell to their lowest level since September before regaining some ground. The most-traded October rebar contract on the Shanghai Futures Exchange was up 0.3 percent at 3,565 yuan ($580) a tonne by the midday break, after hitting a low of 3,523 yuan.
Softer Chinese demand and potentially increased global supply during the second half of 2013 may keep iron ore prices under pressure, pushing some mills to unload some contracted cargoes.
China, which buys about two-thirds of the world’s 1-billion-tonne plus iron ore a year, has imported 186.5 million tonnes in January-March, flat from a year earlier.
‘We’ve been offered some cheap material but we still don’t dare to buy as we are worried the market is now in a straight downward trend,’ said an official who buys iron ore for a small mill in eastern China.
‘Some steelmakers have seen their order books falling sharply and the rainy season in eastern China starts in June so I’m afraid construction demand will be dropping further,’ he added.
(AGENCIES)
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