Iron Ore Plunges Most Since August 2009 on China Demand Concern

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March 10, 2014

Iron ore at Port Hedland, Image courtesy BHP Billiton

By Whitney McFerron

March 10 (Bloomberg) — Iron ore extended its slide into a bear market, plunging the most since August 2009, amid concerns about a possible slowdown in China.

Ore with 62 percent iron content delivered to the Chinese port of Tianjin tumbled 8.3 percent to $104.70 a dry ton today, the lowest since October 2012 and the biggest drop in more than four years, according to data from The Steel Index Ltd. The benchmark price lost 27 percent since Aug. 14, when it reached a five-month high of $142.80. The raw material fell into a bear market on March 7.

China’s imports of iron ore were 61.24 million metric tons in February, down from 86.83 million tons in January, according to customs data released March 8. A surge in stocks at China’s ports spurred speculation that an inventory overhang threatens imports. BHP Billiton Ltd. and Rio Tinto predict lower prices after key producers in Australia and Brazil spent billions of dollars expanding output to supply China, the biggest buyer.

“Anecdotal evidence suggests that increases in stockpiles at the ports, especially iron ore, are for trade finance deals instead of production purpose, which indicates domestic demand may not be as strong as the import number shows,” HSBC analysts Ma Xiaoping and Qu Hongbin said in a report dated March 8.

Iron ore prices have tumbled 22 percent this year. Banks from Citigroup Inc. to UBS AG predict a global surplus this year as Goldman Sachs Group Inc. listed iron ore among its least preferred commodities.

BHP Chief Executive Officer Andrew Mackenzie said Feb. 18 that supply growth may drive prices lower, joining Rio Chief Executive Officer Sam Walsh who said in December that new capacity will lower prices this year.

The global seaborne surplus may climb to 94.2 million tons in 2014 from 9.1 million tons in 2013, UBS AG estimates. Standard Charted Plc forecasts a surplus of 136 million tons.

–With assistance from Maria Kolesnikova and Isis Almeida in London and Phoebe Sedgman in Melbourne.

Copyright 2014 Bloomberg.

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