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UPDATE 1-Iron ore wallows under $40 as weak steel foils China restocking

Published 08/12/2015, 06:30 pm
Updated 08/12/2015, 06:40 pm
© Reuters.  UPDATE 1-Iron ore wallows under $40 as weak steel foils China restocking
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* China iron ore imports rise 9 pct in Nov from Oct

* Dalian iron ore, Shanghai rebar slip again (Updates futures prices, adds Port Hedland)

By Manolo Serapio Jr

MANILA, Dec 8 (Reuters) - Spot iron ore fell to a fresh decade-low below $40 a tonne on Tuesday and softer futures suggest further weakness for the steelmaking commodity already down by nearly half this year amid a global glut.

China's iron ore imports rose 8.8 percent in November from the previous month to 82.13 million tonnes, customs data showed, although the spike must have been due to some "opportunistic buying" as prices fell, said Daniel Hynes, senior commodity strategist at ANZ. urn:newsml:reuters.com:*:nL3N13X1FZ

"We aren't seeing any restocking activity going on now but certainly the additional growth...in capacity in Australia is lending itself to stronger imports and the continued closure of domestic iron ore mines in China is supporting that.

"The buyers are certainly not chasing the cargoes at the moment."

Shipments of iron ore to China from Australia's Port Hedland rose 3 percent from October to 31.73 million tonnes in November. urn:newsml:reuters.com:*:nL3N13W5AX

Benchmark 62-percent grade iron ore for delivery to China's Tianjin port .IO62-CNI=SI fell 1.3 percent to $38.90 a tonne on Monday, according to The Steel Index (TSI), falling for a seventh straight day.

It was the lowest on record by TSI since it began collecting data in 2008. Under the annual pricing regime that preceded the spot-based system, it was the lowest since 2005, based on data compiled by Goldman Sachs (N:GS).

While there's "plenty of scope" for the price to fall further, big, low-cost producers such as Vale VALE5.SA and Rio Tinto RIO.AX RIO.L are unlikely to reduce production, said Hynes.

"Clearly the high cost producers such as the Chinese iron ore miners are feeling the pinch and we're seeing those shut. But for the majors I don't see any production cuts coming in the foreseeable future," he said.

Iron ore has dropped more than 45 percent this year, almost what it lost in all of 2014, as global miners from Australia to Brazil kept boosting output while steel demand in top buyer continued to shrink.

That has forced many steelmakers across China to curb output or shut completely amid widening losses. urn:newsml:reuters.com:*:nL3N13C2BB urn:newsml:reuters.com:*:nL3N13R1CC

Pointing to further losses, iron ore futures in China slipped again after rebounding on Monday. The most-traded May contract on the Dalian Commodity Exchange DCIOcv1 closed down 2.1 percent at 286.50 yuan ($45) a tonne. January iron ore on the Singapore Exchange SZZFF6 also dropped.

Rebar and iron ore prices at 0710 GMT

Contract

Last

Change Pct Change SHFE REBAR MAY6

1654

-7.00

-0.42 DALIAN IRON ORE DCE DCIO MAY6

286.5

-6.00

-2.05 SGX IRON ORE FUTURES JAN

36.8

-0.42

-1.13 THE STEEL INDEX 62 PCT INDEX

38.9

-0.50

-1.27 METAL BULLETIN INDEX

39.06

-0.97

-2.42

Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day ($1 = 6.4166 Chinese yuan)

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