In Commodity News 05/06/2015
Iron ore advanced to the highest level since February after port inventories in China shrank, adding to signs of increased demand for lower-cost seaborne supply as domestic production in the biggest user contracts.
Ore with 62 percent content delivered to Qingdao rose 0.5 percent to $63.33 a dry metric ton on Wednesday, the highest price since Feb. 24, according to Metal Bulletin Ltd. Prices jumped 35 percent since bottoming on April 2 at a decade-low $47.08, and trimmed this year’s loss to 11 percent.
Iron ore swung from a bear to bull market this year as rising low-cost output from the top producers including Rio Tinto Group spurred the closure of smaller mines, including in China. Signs that cuts to supply in China are driving higher demand for seaborne iron ore supported prices, according to Australia & New Zealand Banking Group Ltd. Stockpiles at Chinese ports fell to the lowest level in more than a year.
There’s a “relative shortage of ore in China due to lower Chinese domestic iron ore production,” Caue Araujo, iron ore industry director at AME Group in Sydney, said before Wednesday’s price was released. “Several small-scale, high-cost producers have continued to reduce iron ore output.”
Holdings at Chinese ports fell 1.5 percent to 85.4 million tons last week, contracting for a seventh week to the lowest since December 2013, data by Shanghai Steelhome Information Technology Co. showed. In May, stockpiles shrank 13 percent for the biggest monthly drop on record in data going back to 2010.
The decline in inventory last month means the market is starting to look tight, Macquarie Group Ltd. said in a report e-mailed Wednesday. Stocks will probably build again in the second half as supply increases and demand weakens, weighing on prices, the bank said.
BHP Billiton Ltd. warned on Wednesday that oversupply in commodity markets was likely to persist, while rejecting calls to limit cheap iron ore output. Recently installed low-cost supply can now be stretched to meet growing demand, Chief Executive Officer Andrew Mackenzie said in Canberra.
