iron ore loading dock cranes dry bulk

Iron Ore Futures Fall Below $100 Amid China Concerns

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May 19, 2014

By Jasmine Ng

May 19 (Bloomberg) — Iron ore futures in Singapore traded below $100 a metric ton for the first time since the contract started last year amid concern that slowing demand in China, the world’s biggest user, would worsen the global seaborne glut.

The contract for July settlement on the Singapore Exchange slid 1.3 percent to $97.75 a ton, the lowest level since April 2013. August futures fell 1 percent to $97.85, while prices for June tumbled 1.6 percent to $98. Iron ore is used to make steel.

Futures dropped 28 percent this year as the biggest miners including BHP Billiton Ltd. and Rio Tinto Group boosted output and economic expansion in China slowed amid tighter credit. The global seaborne surplus will jump from 14 million tons last year to 77 million tons in 2014 and 145 million tons in 2015 as exports from Australia and Brazil increase, according to Goldman Sachs Group Inc. Chinese banks had the biggest quarterly increase in bad loans since 2005.

“Concerns about the stability of the Chinese economy continue to weigh on sentiment,” analysts at Australia & New Zealand Banking Group including Mark Pervan wrote in a note. Data showing “the rate of bad loans at major banks continued to rise in the first quarter added to market anxiety.”

Bad loans at Chinese banks increased as a slowdown in the economy boosted defaults. The world’s second-largest economy expanded 7.4 percent in the first quarter, the slowest in 18 months. Growth of 7.3 percent is forecast for this year, the weakest pace since 1990, based on the median estimate in a Bloomberg News survey of economists.

Record Inventories

Stockpiles at ports in China rose 1.8 percent to a record 112.55 million tons in the week to May 16 from a week earlier, according to Shanghai Steelhome Information Technology Co. Inventories climbed 30 percent this year.

“Chinese iron ore imports have continued to surge,” New York-based Commodore Research & Consultancy said in report dated today. “This is because steel mills are consuming a record amount of iron ore.”

At least 30 dry-bulk vessels were chartered in the spot market for the second straight week in the period ended May 16 to ship ore cargoes to China, Commodore said in the report. That’s compared with four weeks in the whole of 2013 when 30 or more vessels were chartered, it said.

Iron ore with 62 percent content delivered to the Chinese port of Tianjin fell 2.2 percent to $98.50 a dry ton today, the lowest level since September 2012, according to data from The Steel Index Ltd. The price has dropped 27 percent this year, after falling 7.4 percent last year.

Copyright 2014 Bloomberg.

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