Iron ore in biggest weekly loss since April

Bucket-wheel reclaimers move iron ore at a terminal in Port Hedland, the world's largest bulk export terminal in Australia. Photo: Bloomberg

Bucket-wheel reclaimers move iron ore at a terminal in Port Hedland, the world's largest bulk export terminal in Australia. Photo: Bloomberg

Published Jul 6, 2015

Share

Jasmine Ng Singapore

IRON ore capped the biggest weekly loss since April as shipments surged and data showed the slowdown in China’s steel industry deepened, vindicating banks from Goldman Sachs to Citigroup that had forecast declines.

Ore with 62 percent content delivered to Qingdao lost 0.7 percent to $55.26 (R680) a dry metric ton on Friday, falling for a seventh day, according to Metal Bulletin.

Prices lost 11 percent this week to the lowest level since April. Producers’ shares sank, with Rio Tinto dropping to the lowest since 2009 in London and Anglo American falling to a 12-year low.

Iron ore’s decline eroded gains seen in the second quarter, when prices rebounded from a decade-low as shipments missed expectations.

The top suppliers, including Rio in Australia and Brazil’s Vale remain intent on increasing supply as they seek to boost volumes and reduce costs per ton, expanding a glut even as demand in China slows.

Goldman and Citigroup said the gains in April and May would not last as low-cost production was set to increase further while demand growth slowed in China.

“The majors are continuing to push the tons,” Paul Gait, an analyst at Sanford C Bernstein in London, said after data showed record shipments in June through Port Hedland, the world’s largest bulk-export terminal.

“Clearly, that’s bad for prices, there’s no way that could be interpreted positively.”

Exports from the port that handles cargoes from BHP Billiton and Fortescue Metals jumped to a record 38.4 million tons last month, according to data last week.

Shipments from Brazil, the biggest exporter after Australia, surged to 32 million tons last month from 29.55 million a year earlier, the government said.

“We’ll still see prices dropping below $40,” Ivan Szpakowski, a commodities strategist at Citigroup in Hong Kong, said on Friday.

The purchasing managers’ index for China’s steel industry, which has contracted for more than a year, extended its decline in June to about a seven-year low of 37.4, government data showed.

New orders slumped to 27.9 from 37.6 in May. A reading below 50 indicates contraction. China is the world’s largest buyer of seaborne iron ore.

The global surplus will expand to 151 million tons in 2018 from 34 million tons this year, according to UBS Group.

Prices may tumble into the $30s in the second half as surging low-cost output swamps the market, Capital Economics said.

Rio’s stock fell as much as 2.2 percent to 2 576p in London, while BHP was 1.9 percent lower, down 33 percent over the past 12 months.

Anglo, which produces iron ore alongside materials from copper to diamonds, dropped as much as 2.7 percent to 893.20p, the lowest since April 2003. –

Bloomberg

Related Topics: