UPDATE 1-China trims long-term iron ore contracts as glut hits market
(Updates iron ore price)
By Manolo Serapio Jr and Ruby Lian
SINGAPORE/SHANGHAI May 30 (Reuters) - Chinese steel mills are cutting back on long-term iron ore contracts in favour of cheaper spot cargoes, confident that beaten-down prices are unlikely to rebound amid the first global ore surplus in 10 years.
Miners in Australia and Brazil, who for years have earned massive profits from China's insatiable demand for iron ore, are ramping up production at a time when steel demand growth is slowing, pushing prices down 28 percent so far this year.
Market talk is swirling that some Chinese mills have cancelled iron ore cargoes, with several traders saying up to four million tonnes have been rejected, although this could not be verified by Reuters.
Iron ore demand in China is still near record levels - April imports of 83 million tonnes were the second-highest ever - but miners such as Vale, Rio Tinto and BHP Billiton are boosting production even faster.
"For the first time in 10 years, supply is greater than demand," Jose Carlos Martins, head of Vale's ferrous metals division, said late last month. "At the same time, demand has risen slower than expected."
Shipments from dominant producers Australia and Brazil are expected to grow by 40 percent over the four years to 2017, when annual exports will reach 1.27 billion tonnes, according to Australia's Bureau of Resources and Energy Economics.
Australian miner BC Iron said some of its customers have asked for small discounts or more flexible pricing periods, but it has not seen any cancellations. Continuación...