Iron ore futures in China and Singapore edged lower again on Tuesday, after recent gains,pressured by plentiful supply forcing Chinese mills to unload more cargoes into the market.
An upbeat reading on China's manufacturing sector for June helped boost spot iron ore prices on Monday, but traders say the
raw material may decline again as supply outstrips growth indemand from the world's top importer.
Chinese steel producers are selling iron ore cargoesarriving in July under their long-term contracts with miners and using the cash to buy cheaper iron ore sitting at China's ports,said a trader in Shanghai.
"We're doing this business now with mills who are trying to sell their long-term cargoes that are index-based and are more
expensive than those at the ports," he said.
Australian 61-percent grade Pilbara iron ore fines arecurrently trading at around 600 yuan a tonne at China's Shandong port, or about $82-$83 excluding port charges and taxes, he said. That compares to a price of $93 per tonne for a new seaborne cargo of the same grade on Monday, he added.
The global iron ore supply surplus, which Goldman Sachs sees hitting 72 million tonnes this year, has pushed Chinese mills to
cut back on long-term contracts in favour of cheaper spot cargoes.
Iron ore for delivery in September on the Dalian Commodity Exchange closed 1 percent lower at 683 yuan ($110) a tonne. It touched a three-week high of 699 yuan on Monday.
The August iron ore contract on the Singapore Exchange dropped 1.1 percent to $92.87 a tonne, with the July and September contracts also slipping.
The weaker futures could weigh on spot iron ore prices which have rebounded since hitting a 21-month low last week. Benchmark 62-percent grade ore for immediate delivery to China .IO62-CNI=SI climbed 1.4 percent to $93.40 a tonne on Monday, according to data provider Steel Index. It marked a fifth straight day of gains since the price struck $89 on June16, the lowest since September 2012.
BHP SEES MORE JOB CUTS
Iron ore, the top business for global miners Vale Rio Tinto and BHP Billiton, has lost more than 30 percent of its value this year.
It has stayed below $100 a tonne for five weeks, far longer than it did during the September 2012 slump, prompting even low-cost producers such as BHP to look at trimming costs further to stay competitive.
BHP, the world's third-biggest iron ore miner, said it is planning to cut more jobs at its Australian iron ore division as it seeks to reduce costs.
BHP employs about 16,000 people in its iron ore division and earlier this year said that 170 jobs would go at its Whaleback mine in the Pilbara iron ore belt. A further 100 people have been let go at the division's Perth headquarters.
Coping with rising supply and stiffer competition, Australian rivals Rio and Fortescue Metals Group are making deeper cuts in prices of low-grade iron ore cargoes to China.
"It's quite tough on the ground. There's still too much cargo available and mills don't want to chase prices because they've got plenty of buying options," said anotherShanghai-based trader.
Stocks of imported iron ore at 44 Chinese ports stood at 113.65 million tonnes as of June 20, exceeding the previous record of 113.60 million tonnes reached in end-May, based ondata from industry consultancy Steelhome.
Source: Reuters
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