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UPDATE 1-Iron ore at near 4-month low as China steel struggles

Published 04/11/2015, 06:44 pm
Updated 04/11/2015, 06:50 pm
© Reuters.  UPDATE 1-Iron ore at near 4-month low as China steel struggles
VALE
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* Vale expansion to further flatten cost curve -ANZ

* Shanghai rebar pinned to a record low (Updates futures prices)

By Manolo Serapio Jr

MANILA, Nov 4 (Reuters) - Spot iron ore prices have slipped to their lowest since July amid sustained weakness in steel prices in China that could prompt deeper output cuts among producers.

The steelmaking ingredient iron ore, trading below $50 a tonne and down nearly a third this year, has been hit by a sustained increase in low-cost supply as Australian and Brazilian miners edge out higher cost rivals.

And that has been met with an economic slowdown in the top consumer of the commodity that has further undercut the market.

"Steel mills are slowing down production. That's why they're not in a hurry to take cargo, even from the ports," said an iron ore trader in Shanghai.

Iron ore stocked at China's ports reached 84.75 million tonnes on Oct. 30, the highest since May, data tracked by consultancy SteelHome showed. SH-TOT-IRONINV

Iron ore for immediate delivery to China's Tianjin port .IO62-CNI=SI fell 0.8 percent to $48.70 a tonne on Tuesday, according to The Steel Index (TSI).

That was the lowest for the spot benchmark since July 9, leaving it a tad above this year's bottom of $44.10, which is also its weakest since TSI began compiling data in 2008.

On Wednesday, the most-active January iron ore on the Dalian Commodity Exchange DCIOcv1 ended nearly flat at 351 yuan ($55) a tonne after hitting a 16-week low of 345 yuan on Tuesday.

China's shrinking steel demand has pinned steel prices to record lows, prompting more producers to ship surplus output overseas. China's steel exports reached a record 11.25 million tonnes in September.

"The declining growth of Chinese steel industry is likely to further aggravate the situation in seaborne iron ore market," ANZ said in a note.

Citing top iron ore miner Vale's VALE5.SA expansion of low-cost supply from its S11D project in Brazil, likely to boost its exports to 300 million tonnes by 2019 from 180 million tonnes in 2016, ANZ said "this will further flatten the seaborne cost curve and force the closure of swing suppliers."

Rebar on the Shanghai Futures Exchange SRBcv1 slipped 0.1 percent to close at 1,780 yuan a tonne, after matching Tuesday's record low of 1,773 yuan.

Rebar and iron ore prices at 0720 GMT

Contract

Last

Change Pct Change SHFE REBAR MAY6

1780

-2.00

-0.11 DALIAN IRON ORE DCE DCIO JAN6

351

+0.50

+0.14 SGX IRON ORE FUTURES DEC

45.05

+0.75

+1.69 THE STEEL INDEX 62 PCT INDEX

48.7

-0.40

-0.81 METAL BULLETIN INDEX

49.11

-0.39

-0.79

Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.3347 Chinese yuan) (Editing by Tom Hogue and Sunil Nair)

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