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Bears gorge as stockpiles grow

Iron ore extended its decline into a bear market this week on concern that demand in China may slow, exacerbating the impact of rising global supplies.

Ore with 62 percent iron content delivered to Tianjin fell 8.3 percent to $104.70 (R1 043) a dry ton, its lowest price since October 2012 and the biggest drop in more than four years, according to data from The Steel Index on Monday.

The benchmark price has lost 27 percent since August 14 last year, when it reached a five-month high of $142.80. The raw material dropped into a bear market on Friday.

Stockpiles of ore at Chinese ports stood at 105 million tons, 21 percent more than a year ago, Shanghai Steelhome Information Technology said.

Anecdotal evidence suggested increases in stockpiles at ports, especially of iron ore, were for trade finance deals instead of production, HSBC Holdings analysts Ma Xiaoping and Qu Hongbin said in a report.

Shanghai Chaori Solar Energy Science & Technology, a solar cell maker, became the first company to default on onshore corporate bonds in China last week. That may prompt investors to reassess credit risks, according to Bank of America.

“The default… followed by weaker-than-expected Chinese trade data, has sparked a sharp decline in iron ore and copper,” Citigroup analyst Ivan Szpakowski said yesterday.

“These concerns have combined with the fundamental weakness of physical markets for both commodities due to increasing supply and weakening demand from China,” he said. – Bloomberg

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