Iron ore futures slumped to a four-month low in China on Thursday on sliding demand and soaring stock piles in China, the world’s largest steel maker.
Iron ore for September delivery on the Dalian Commodity Exchange dropped as low as 445 yuan ($88) a tonne, its weakest since January 4. A short while ago it was down 5% at 447.5 yuan. Rebars on the Shanghai Futures Exchange slid 1.8% to 3,052 yuan a tonne.
The metal plunged into a bear market, which refers to a 20% fall from peak for an asset, last month on fears supplies will continue to climb even as China clamps down on polluting steel mills forcing producers to cut down or stop production.
Iron ore stocks at the country’s ports reached 131.95 million tonnes last week, according to SteelHome. That’s near the 132.5 million tons in March, the most since the steel sector consultancy firm began tracking it in 2004. Stocks are up from about 100 million a year ago. China is the largest buyer, accounting for about two-thirds of global cargoes.
Prices of iron ore, Australia’s largest mining export, in the spot market has slumped closer to $US60 a tonne from $US94.86 in February, the highest since 2014.
“After strong gains in late 2016 and early 2017, iron ore prices have fallen sharply,” the Australian government said in its annual budget.
The iron ore price is assumed to decline from a recent average of around $US66 per tonne to reach $US55 per tonne in the March quarter of 2018, the government said in the section titled Economic Outlook.
That is still higher than some analysts forecasts. Macquarie analysts expect the price to fall to $US48 a tonne by the end of the year while Citigroup sees the iron ore price averaging $US45 this year.
China’s import of the ore has started to slip after jumping in the first three months of the year. Trade figures from China on Monday showed the world’s second-largest economy purchased 82.23 million tonnes, lower than in March and also weaker than an year earlier.
Still, imports expanded 8.6% to 353 million tonnes in the four months to April 30 according to customs data.
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