In Commodity News 01/05/2015
Chinese iron ore futures slid nearly 3 percent on Thursday, adding to steep losses the session before, as Chinese buying interest tapered off after a recent restocking binge that lifted benchmark spot prices by as much as 27 percent this month.
Spot iron ore pulled back on Wednesday after hitting its highest level in nearly eight weeks, halting a rally in the commodity battered by a global glut since last year.
“The supply-demand balance hasn’t changed much and there was really no reason for the recent big jump in prices,” said a Shanghai-based iron ore trader.
Chinese mills that were low on iron ore stocks replenished inventories amid weak prices and “traders and miners jumped on the opportunity to push prices higher,” he said.
Physical trading activity was also limited ahead of the May 1 public holiday in China, he said.
The most-traded September iron ore contract on the Dalian Commodity Exchange was down 2.8 percent at 410.50 yuan ($66) a tonne by 0246 GMT after falling as low as 406.50 yuan.
Weaker futures may stretch losses in spot prices. Iron ore for immediate delivery to China’s Tianjin port .IO62-CNI=SI fell nearly 4 percent to $56.90 a tonne on Wednesday, according to The Steel Index, mimicking the drop in Dalian futures in the previous session.
Iron ore rose as high as $59.20 a tonne on Tuesday from a decade-low of $46.70 on April 2. It was up 11.6 percent so far for the month.
The steelmaking raw material is “now likely to be moving into a consolidation phase and establishing a new trading range with the near term peak of around $60/tonne a potential upper limit,” ANZ Bank said in a note.
Iron ore miner Cliffs Natural Resources Inc blamed top producers Rio Tinto and BHP Billiton for weak iron ore prices.
Cliffs Chief Executive Lourenco Goncalves said on Wednesday that prices are depressed “not by the fact that these guys produce a lot of iron ore, but by the fact that they are saying that they will produce a lot more.”
The top, low-cost miners, including Brazil’s Vale have been expanding output to ship more to China as they edge out higher cost suppliers off the market.
More new low-cost supply from Rio and BHP this year would cap any rally in iron ore prices, said Morgan Stanley which has kept its 2015 price estimate unchanged at $57.
