Iron ore spot stretches losses as cargoes flood market

Publish time: 30th October, 2011      Source: ChinaCCM
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Reuters reported that iron ore price offers fell further on Thursday as slow Chinese demand and hefty spot supplies extended the losing streak of the steelmaking raw material whose value has fallen by more than 30% since September. Chinese consultancy Umetal said sellers of Australian, Brazilian and Indian ore to top importer China cut prices by USD 5 per tonne to USD 8 a tonne from Wednesday, as miners many of whom continue to produce at full capacity and tried to clear shipments that have piled up.

A Singapore based iron ore trader said "Miners are flooding the market with cargoes and that's putting a lot of pressure on the spot market and rates are coming off." Traders said despite the sharp fall, spot iron ore prices are still more than double miners' production cost of around USD 50 a tonne for the big producers in Australia and Brazil.

Top iron ore producer Vale said on Wednesday it expected prices to remain high for a long period of time driven by solid demand from emerging economies. Second ranked Rio Tinto this week blamed Vale for the steep drop in iron ore prices, saying its bigger rival was diverting Europe-bound shipments to China. But Rio said it was producing at record rates. European trader said "I think there is more space for prices to fall. There are a lot distressed cargoes around."

Traders said Indian suppliers are subject to higher costs and therefore not able to lower their offers as much as the big three producers. An iron ore trader in Shanghai said "Bids are too low. I think the mills are not in a hurry to buy so they bid very low, hoping they can catch a bargain, adding he saw a bid for the Indian 63.5/63 grade at as low as USD 126.' He said "Mills expect the market to dip a bit further so they want to try their luck to get some cheap deals."

China appetite for iron ore has weakened sharply because of slowing demand for steel in the country dented by uncertainty in the global economy and Beijing's monetary tightening campaign.