Iron ore stockpiled at ports in China posted the longest run of gains this year, and Australia & New Zealand Banking Group Ltd. predicts holdings will probably expand further, hurting prices that have dropped below $50 a metric ton.
The inventories climbed 1 percent to 84.75 million tons last week to the highest level since May, according to Shanghai Steelhome Information Technology Co. The gain was the third straight increase, the longest run of rises since November.
“Slowing Chinese demand continues to push up Chinese port stocks,” ANZ wrote in a report on Monday. “We believe, based on seasonality trends, that there is still upside in port stocks, which should continue to put some downside pressure on iron ore prices.”
Iron ore sank 12 percent in October on surging supply from low-cost miners including Rio Tinto Group and weaker consumption in China. The purchasing managers’ index for China’s steel industry fell to 42.2 last month from 43.7 in September, with readings below 50 indicating contraction. Steel demand is shrinking at an unprecedented speed and mills are making losses as product prices drop, according to the China Iron & Steel Association.
Sub-$50 Prices
Ore with 62 percent content delivered to Qingdao was at $49.83 a dry ton on Friday, according to Metal Bulletin Ltd. Prices, which fell as low as $49.65 last week and are headed for a third annual loss, bottomed at $44.59 in early July, the lowest since daily data began in 2009.
This month’s uptick in port holdings follows rising exports this year to China, which accounts for half of global steel output. Shipments from Australia’s Port Hedland to China were 33.8 million tons in September, near the record 33.9 million tons set a month earlier. Brazil’s exports totaled 35.6 million tons in September, the most this year. The voyage from Brazil takes about 35 days, three times the journey from Australia, AXSMarine Ltd. estimates.
“There’s room for port stockpiles to climb further through year-end as the major miners continue to export large amounts of ore while mills’ purchases remain sluggish,” Huang Huiwen, an analyst at Shanghai Cifco Futures Co., said by phone. “Steel prices are so weak currently, so mills are unlikely to boost production. Conversely, steel output will fall because northern mills typically shut over November and December for the winter.”
The weak steel market and oversupplied ore trade have constrained buying interest, Morgan Stanley analyst Tom Price wrote in a note received Friday. Prices are under pressure as steelmakers tend to scale back production before the northern hemisphere winter lull, curbing demand, Price said.
Source: http://www.bloomberg.com/