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Wednesday, December 21, 2011

Iron ore prices drop in China amid falling investments

Wednesday, 21 Dec 2011

Xinhua reported that sharply decreasing fixed asset investment in the railways and increased housing inventory in the property market are cutting demand for steel, resulting in falling prices of imported iron ore in the world's second largest economy.

According to the Xinhua-China Iron Ore Price Index that was released that inventories of iron ore at 25 of China's major sea ports dropped 1.6% to 97.99 million tonnes in the week ending on Dec 19 from the previous week.

According to the index, which is compiled by the Xinhua News Agency to track iron ore inventories and imports in Chinese spot markets Last week's imported iron ore stock was 1.61 million metric tons less than that of one week earlier.

The price index for 63.5% purity iron ore imports fell 4.1% to hit 139 points while that for 58% purity iron ore imports decreased by 1.7% WoW to rest at 117 points.

Analysts said the declining prices of iron ore are a result of a sluggish steel market amid falling investment in the nation railway projects and increased housing inventory in the property sector.

According to data from the Ministry of Railways, fixed asset investment in railways in the first 11 months of the year plunged 28.4%YoY to CNY 492 billion. The decline rate widened by 3.2 percentage points compared to that in the first ten months.

In November, more major cities saw drops in new home prices from October as housing sales slipped 1.2%YoY with major developers such as China Vanke experiencing a 20% sales decrease last month.

Analysts predicted a further downward trend for the iron ore prices in the coming week as steel companies are becoming cautious in purchases amid expectations that downstream businesses will cut demand for steel.

(Sourced from Xinhua)

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