Chinese steel and iron ore futures hovered near their lowest levels on record on Wednesday because of a supply glut that has slashed spot iron ore prices by almost 41% this year.
Some Chinese steel mills were buying spot iron ore cargoes to replenish stocks ahead of the week-long National Day holiday from October 1, but volumes were small and buyers were scouring the market for cheap deals, traders said.
"There's some restocking going on, but these mills are not offering high prices because there's so many cargoes in the market," said an iron-ore trader in Rizhao in China's eastern Shandong province.
Iron ore for January delivery on the Dalian Commodity Exchange closed up 0.7% at 562 yuan ($92) a tonne. That follows a four-day slide that pushed the price down to 552 yuan on Tuesday, its lowest since the bourse launched iron ore futures in October last year.
The most active rebar contract on the Shanghai Futures Exchange slipped 0.2% to end at 2 616 yuan a tonne, not far above a record low of 2 591 yuan reached on Tuesday.
A weaker steel market in China has helped fuel the slide in iron ore prices, with steel stockpiles at mills rising as production remained high.
Inventory of steel at large Chinese mills rose 6.3% to 15.136-million tonnes by September 10 compared to late August and daily crude steel output rose 7% during the period, according to data from the China Iron and Steel Association.
Equally weighed down by excess supply, spot iron ore prices languished at five-year lows and are unlikely to recover strongly, as they did after a 2012 rout.
AUSTRALIA CUTS FORECAST
Australia, the world's biggest supplier of the steelmaking raw material, has cut its iron ore price forecast for 2015 due to rising supplies.
The country's Bureau of Resource and Energy Economics now sees iron ore averaging $92.40 a tonne next year against a previous estimate of $94.60.
Iron ore for immediate delivery to China slipped another half a percent to $79.40 a tonne on Tuesday, the lowest since September 2009, according to data compiler The Steel Index.
Tuesday marked the sixth consecutive day of losses for iron ore, which has dropped almost 10% this month.
The weakness in iron ore prices may continue for another six months due to slower Chinese demand and plentiful supply, said Eiji Hayashida, president of JFE Steel, Japan's No. 2 steelmaker.
While the price slump has pushed out some high-cost producers from the market, those in China have yet to respond, said Justin Smirk, senior economist at Westpac Institutional Bank.
"We had thought that the 30% fall in Chinese ore prices so far this year would have forced Chinese miners, who are at the top of the cost curve, to adjust and close mines. We are yet to see this," Smirk said in a research note.
"If we don't, downside pressure on prices can continue for the remainder of this year."
In the latest sign of strain in China's troubled steel sector, steel transporter Anhui Wanjiang Logistics said 2-billion yuan ($326-million) of its loans were overdue and its chairman had been detained by police.
Chinese state metals trader Sinosteel Corp said on Tuesday it was facing financial problems, although it denied rumours it was struggling under the weight of overdue loans amounting to 10-billion yuan.
Source: Reuters
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