Iron Ore-Spot prices may fall further on slow China demand

Tuesday, 29 November 2011

Spot iron ore prices are likely to extend losses this week as lean steel demand in top consumer China may limit appetite for the raw material, with sellers cutting prices further on Monday. Iron ore with 62 percent iron content dropped half a percent to $140.40 a tonne on Friday, according to the Steel Index .IO62-CNI=SI, putting its weekly loss at 4.8 percent. It was iron ore's first weekly drop in four weeks.

"The price will continue to slide this week. Sentiment hasn't really changed much, steel demand in China is still very limited," said an iron ore trader in Shanghai.

Offer prices of imported iron ore in China fell by another dollar per tonne on Monday, with Australian Neman fines quoted at $139-$141 a tonne, cost and freight and MAC fines at $133-$135, said Chinese consultancy Umetal.

Australian Pilbara iron ore fines were offered at $135-$137 a tonne and Indian 63.5/63 grade fines were quoted at $143-$146, said Umetal.

Iron ore prices fell to 22-month lows below $117 a tonne in late October when thin Chinese steel demand slashed the appetite for the steelmaking ingredient.

But traders said prices are unlikely to go into freefall again as supplies remain tight.

"The big miners are not putting too many cargoes in the spot market, supply from India has been reduced dramatically and a lot of traders are holding on to their cargoes, waiting for prices to recover before they sell," said a physical iron ore trader in Singapore.

Rio Tinto , the world's No. 2 iron ore miners, warned on Monday that further cracks may be emerging in global commodities markets as the economies of Europe and the United States waver, with its customers increasingly cautious on the outlook.

Prices of iron ore, copper and aluminium -- among Rio's biggest income earners -- have tumbled by more than 20 percent each since August as stockpiles of unused metal swell in warehouses from Rotterdam to New Orleans to Shanghai.

BHP Billiton , the third biggest iron ore producer, expects China's steel output to continue at current rates, below historical highs, for some time.

"When we talk to our Chinese customers there is not a sentiment that the operating rate in the steel industry will improve or change dramatically over the next little while," Chief Executive Marius Kloppers said on a conference call.

Source: Reuters