Singapore iron ore futures tumbled below $40 a tonne on Monday, amid increasing worries over demand for the steelmaking ingredient from top consumer China.
The iron ore contracts on the Singapore Exchange tumbled more than 3 percent to below $40 a tonne during the session. The January and February contracts traded $39.67 a tonne and $38.85 respectively.
On the onshore market, the most active iron ore futures on the Dalian Commodity Exchange slumped 3.6 percent to 293.5 yuan ($45.88) a tonne by close after touching their weakest since July 9. Prices have lost 34 percent since the beginning of this year.
Local steel mills are expected to step up output cuts due to deeper losses and shrinking demand, as China's economy cools and construction activity slows in the country, forcing steel mills to cut inventories of the raw material.
"Chinese steel mills are not restocking iron ore as they are suffering extreme tightness in liquidity and deeper losses from continuous declines in steel prices," said Xia Junyan, an analyst with Everbright Futures in Shanghai."Steel demand keeps shrinking, but mills haven't cut output quickly enough, dampening steel prices."
The benchmark rebar futures contract for May delivery on the Shanghai Futures Exchange fell to as low as 1,621 yuan a tonne, touching the lowest in decades, before closing 2.5 percent lower at 1,626 yuan. Rebar prices have lost 41 percent so far this year.
Prices of steel billet, a semi-finished steel product that is widely watched by traders as an indicator for broad steel market, dropped 20 yuan to 1,480 yuan a tonne on Monday after dropping 40 yuan over the weekend, traders said.
The sharp drop in billet prices has fuelled worries that some small steel mills may be forced to shut down permanently.
Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI slipped 0.2 percent to $43.50 a tonne last Friday, according to the Steel Index. That was near $43.4 hit on
Nov. 24, the lowest indices started being compiled in 2008.
Source: http://in.reuters.com/