Iron ore prices dip as SHFE rebar futures contract at lowest level

Tuesday, 18 Oct 2011

Reuters reported that spot iron ore prices may extend losses this week after sliding to their lowest in more than 11 months as key steel prices in top consumer China which fell to a contract low on Monday continue to restrain buying interest.

Supply of iron ore in the spot market has risen sharply with cargoes meant for long term, or three-month, contracts being sold at spot rates because Chinese mills were not keen on buying the material at contract rates that are far higher than spot.

Under supply contracts for the fourth quarter, miners are charging more than USD 175 a tonne for iron ore based on a pricing system that averages spot prices over a previous three-month period. But spot rates have fallen sharply over the past week to under USD 160 a tonne on Friday as weaker steel demand in China cut appetite for iron ore, the key raw material in making steel.

A Shanghai based iron ore trader said "It's difficult to say where the bottom is for prices. At this moment, it seems that USD 150 probably won't be the bottom for 62 (grade ore)."

The trader said "We haven't seen any change in sentiment. If the miners will continue to put all these spot cargoes in the market I believe the price will be pushed further down."

According to the Steel Index iron ore with 62% iron content fell 1.7% to USD 157.50 a tonne on Friday .IO62-CNI=SI and down 1.7% to USD 157.25 based on Platts IODBZ00-PLT. Both are the lowest levels since early November last year.

Both indexes lost more than 7% last week, their biggest weekly drop since early July 2010. Those losses could stretch this week, with steel futures in China down for a third straight session on Monday.

(Sourced from Reuters)