Spot iron ore prices fell towards a 5-1/2 year low of $68 per tonne overnight, stretching their losses into an eighth session, as buyers in top consumer China stayed away amid hopes prices would drop further.
According to data compiled by the Steel Index, 62 percent grade iron ore for immediate delivery to China .IO62-CNI=SI slipped 0.7 percent overnight to $68.10 a tonne, near a low of $68 hit last month - the weakest since June 2009.
"Seaborne iron ore prices fell as buyers remain sidelined in the absence of clear indications on market direction, seeing little upside," said ANZ Bank in a note.
"While steel mill restocking interest is present, buyers appear to be holding off for further price declines," it added.
A drop in steel consumption during winter and a slowdown in construction activity is expected to further drag on iron ore prices that have almost halved so far this year, traders said.
While many mills in China, the world's biggest steel producer and consumer of iron ore, have been suffering as a result of weakening demand growth, many of the bigger players are now experiencing their first solid profits in years as a result of the collapse in raw material prices.
Despite the overcapacity problems that have ravaged the industry, the profitable steel mills have had no incentive to cut output. China Iron and Steel Association (CISA) data on Wednesday showed that daily production runs rose 2.1 percent in the first 10 days of December.
"The oversupply problem is the root cause and prices will continue to fall if the authorities don't do more to deal with it," said a manager with a steel and iron ore trading company based in eastern China's Zhejiang province.
He said the sector was waiting for new policies next year that could force more producers to shut down, especially in the top producing province of Hebei.
Amendments to China's environmental law come into force on Jan. 1 and could raise compliance costs for smaller mills. Many producers could also be hurt by a widely anticipated cancellation of a controversial export tax rebate that has enabled them to sell much of their surplus production overseas.
Steel rebar futures in Shanghai inched down nearly 0.2 percent to 2,540 yuan per tonne on Wednesday. Iron ore on the Dalian Commodity Exchange rose 1.7 percent to end at 485 yuan ($78) per tonne.
Source: Reuters |
