In Commodity News 06/04/2015
Chinese iron ore futures dropped for the eighth straight session on Friday and were heading for their biggest weekly fall ever amid weak buying interest in global top consumer China and excess supply of the steelmaking material.
Benchmark 62 percent grade iron ore for immediate delivery to China plunged 4.7 percent on Thursday to $46.70 a tonne, the lowest level since the Steel Index began compiling the prices in late 2008.
Steel mills that are struggling with slower-than-expected demand recovery have capped production and held back building up stocks on expectations that a supply glut would further depress prices of the steelmaking ingredient.
Iron ore futures for September delivery on the Dalian Commodity Exchange dropped as low as 370 yuan ($60) a tonne, weakest since the launch of the contract in October 2013.
By 0302 GMT, the contract was trading 1.6 percent lower from Thursday at 378 yuan, on track for its largest-ever weekly decline of 10 percent and a third straight weekly drop.
The low-cost production expansion by the world’s largest iron ore miners Vale, Rio Tinto and BHP Billiton is expected to keep prices at relatively low levels for a long time, analysts say.
“Top miners are using low prices to take over market share in China and squeeze others out of the market,” said Li Yajing, an analyst at Guangyong Futures in Guangzhou.
Some investors have started to take long positions on expectations of a technical rebound after the sharp declines in iron ore prices, but analysts expect any potential gains will be capped due to weak fundamentals.
“Some investors believe that prices have touched bottom and have switched to a long position, but I expect the weak spot market to drag prices lower,” Li said.
The most-traded October rebar contract on the Shanghai Futures Exchange fell for the fourth straight session, hitting a session low of 2,377 yuan, weakest since the bourse started trading the contract in 2009.
By 0302 GMT, prices were down 0.6 percent at 2,354 yuan, headed for a sixth consecutive weekly loss.
