SINGAPORE, Mar 14: Spot iron ore prices and Shanghai rebar futures fell to their lowest levels for the year on weak steel demand in top consumer China, driving down shares of top miners Rio Tinto and BHP Billiton to their cheapest in more than three months.
Chinese steel mills produced a record amount of crude steel on a daily basis last month as they looked to stronger demand in March when construction, which accounts for half of the country’s steel demand, typically picks up.
But record stockpiles of steel products meant demand has not picked up as they had expected, dragging down steel prices which have cut appetite for raw material iron ore.
The most-traded rebar contract for October delivery on the Shanghai Futures Exchange hit a session low of 3,741 yuan ($600) a tonne, its weakest since Dec. 7. It closed down 1.8 percent at 3,765 yuan.
Benchmark 62-percent grade iron ore <.IO62-CNI=SI> slid more than 3 percent to $139 a tonne on Wednesday, its lowest since Dec. 24, based on data from information provider Steel Index.
Iron ore has lost more than 12 percent since peaking this year at $158.90 on Feb. 20, its highest level in 16 months, as Chinese restocking efforts stalled on concern over steel demand.
China’s renewed campaign to cool its property sector, including stricter enforcement of an existing 20 percent capital gains tax on home sales, also soured the outlook for steel and iron ore demand.
With iron ore swaps stretching steep losses from the previous session on Thursday, traders said they expect spot iron ore prices to fall further.
‘The pressure is coming from the steel market, demand is not picking up,’ said an iron ore trader in Shanghai.
China’s daily output of crude steel jumped to a record 2.2 million tonnes in February, but the weak demand only bloated stockpiles of steel products.
Inventory of steel products held by traders in China also reached a record 22.3 million tonnes as of March 8, with long steel products accounting for about 14.1 million tonnes, according to industry consultancy Mysteel.Com.
MINERS SLIDE
The slide in iron ore prices hurt Australian-listed shares of Rio Tinto and BHP Billiton with each falling more than 2 percent to their cheapest since Dec. 10.
‘The market is acting like we are in for a sustained retreat in iron ore after its higher charge since Christmas,’ said Ben Taylor, sales trader at CMC Markets in Sydney.
Rio shares fell to as low as A$60.61 before closing at A$60.70, down 2.3 percent. BHP shares fell 2.3 percent to A$35.09, just a tad shy off the intraday bottom of A$35.06.
‘It looks like iron ore has more room to fall. With April swaps trading so low, mills can lock in their April shipment at around $130,’ said a trader in Hong Kong, who sees spot prices heading to $120.
The April swaps contract was trading at $129 on Thursday, after falling about 3 percent to settle at $129.63 on Wednesday, traders said. A fall below $129 will be the lowest for the contract since late December.
‘Mills are not buying, they will just stick to their tonnages under their long-term contracts since they are not in any hurry,’ said the Hong Kong trader.
A tender for the sale of 63-percent grade Brazilian iron ore fines was cancelled on Wednesday, and so far no tenders were scheduled for Thursday, traders said.
‘Probably bids were too low,’ said the Shanghai trader on the cancellation of the Brazilian tender.
(AGENCIES)
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