Iron ore hits 7-year low as China woes deepen

Reuters Manila | Updated on January 22, 2018 Published on November 18, 2015

Spot iron ore is on track to extend losses, approaching a seven-year low on prolonged worries over declining steel demand in China that has pushed ferrous futures deeper into the red. Falling steel demand has prompted many loss-making Chinese producers to either cut output or shut capacity.

Another mill located in China's top steel producing Hebei province may have shut, market sources say. Iron ore for immediate delivery to China's Tianjin port tumbled 3.2 per cent to $45.80 a tonne on Tuesday, according to the Steel Index (TSI). That was the lowest for the spot benchmark since July 8 when it touched $44.10, the weakest level since TSI began compiling data since late 2008.

Weaker iron ore futures in China point to further declines in spot prices. The most-traded January iron ore on the Dalian Commodity Exchange fell to as much as 333 yuan ($52) a tonne, its lowest since July 9. It closed down 1.8 per cent at 337.50 yuan. The Baltic Exchange's main sea freight index, which tracks rates for ships carrying dry bulk commodities such as iron ore, fell to its weakest since an all-time low plumbed in February.

Chinese construction activity is expected to slow during the seasonally weak winter period, curbing steel demand that has already dropped nearly 6 per cent in the first 10 months of this year and likely to push prices of construction steel products such as rebar even lower. The May rebar contract on the Shanghai Futures Exchange touched a record low of 1,731 yuan a tonne and ended down nearly 1 per cent at 1,736 yuan. There was little cheer from data showing that home prices in China rose for first time in over a year in October on an annual basis.

Published on November 18, 2015
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