Iron ore closed in on its weakest level since 2009 amid plentiful supply and tepid demand from Chinese steel producers concerned over a sluggish market.
The abundant supply of the steelmaking commodity is pushing more Chinese mills to unload excess cargoes back into the spot market, traders said.
“We are seeing steel mills selling their March iron ore cargoes,” said an iron ore trader in Singapore, adding his company received eight such offers from mills in China that each have 3-4 million tonnes crude steel capacity.
“This tells us that they are looking to slow down their crude steel production as they do not require so much iron ore.”
China’s crude steel output rose to a record 822.7 million tonnes last year, but the annual increase stood at just 0.9 percent, the lowest since 1981.
China, the world’s top consumer of both steel and iron ore, posted its weakest economic expansion in 24 years in 2014 as property prices cooled and steel demand weakened.
Iron ore for immediate delivery to China’s Tianjin port .IO62-CNI=SI dropped 0.6 percent to $67.40 a tonne on Tuesday, based on data compiled by The Steel Index.
The price fell 47 percent last year amid a supply glut, touching a low of $65.60 in December, its weakest since June 2009.
That glut is likely to get bigger this year, analysts say, as major producers continue to ramp up production.
BHP Billiton , the world’s No. 3 iron ore producer, said on Wednesday its output rose 16 percent to 56.35 million tonnes in October-December and it aims to boost annual production by 11 percent to 225 million tonnes in fiscal 2015.
On Tuesday, second-ranked Rio Tinto said fourth-quarter output rose 12 percent from a year earlier to 79.1 million tonnes as it hit its full-year goal of 295 million tonnes.
Iron ore for May delivery on the Dalian Commodity Exchange slumped nearly 4 percent to end at 486 yuan ($78) a tonne on Wednesday, with losses deepening just before the close.
The most traded May rebar contract on the Shanghai Futures Exchange dropped 1.2 percent to 2,472 yuan a tonne.
Source: Reuters
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