In Commodity News 16/04/2015
Iron ore futures in China and Singapore retreated on Wednesday after a two-day rally as investors opted for caution amid festering concern over a market rout that has punished smaller miners.
China’s crude steel output dropped 1.7 percent to 200.1 million tonnes in the first quarter from a year ago as the world’s No. 2 economy posted its slowest quarterly growth since 2009.
A global glut stoked by low-cost miners from Australia and Brazil at a time of softening Chinese steel demand has pushed spot prices for steelmaking commodity iron ore to the lowest in a decade.
Iron ore for September delivery on the Dalian Commodity Exchange closed 1.3 percent lower at 387 yuan ($62) a tonne after surging more than 8 percent in the past two days.
“Market participants are very cautious as they quickly locked profits after a two-day rally,” said Li Wenjing, analyst at Industrial Futures in Shanghai.
Li said the decline in China’s crude steel output showed the impact of tough environmental rules, with some mills shutting across the country.
The May iron ore contract on the Singapore Exchange dropped 1.9 percent to $49.05 a tonne.
Weaker futures could stall a recovery in spot prices. Iron ore for immediate delivery to China gained 2.7 percent to $50.10 per tonne on Tuesday, according to The Steel Index (TSI).
The spot price fell as far as $46.70 on April 2, the lowest level since TSI began publishing prices in October 2008. Based on annual iron ore price contracts that preceded the current spot-based system, it was the lowest since 2004-2005, according to data compiled by Goldman Sachs.
“The outlook remains opaque for iron ore prices, and the prospects of subsidies for the ailing Chinese domestic market will only serve to prolong a weak price environment,” Morgans Financial said in a note.
China will halve taxes on iron ore miners from May 1 to prop up its struggling industry.
“Whilst some investors will see the depressed share price as incentive to invest, we view the current uncertainty as excessive and suggest investors sit on the sidelines and wait for clearer signs of a recovery,” Morgans Financial said.
Australian miner Atlas Iron Ltd’s has said it will halt mining amid falling prices and China’s Sinosteel Midwest Corp will suspend production at its Blue Hills iron ore project in Australia.
