Iron ore futures struggle as oversupply woes linger
* Spot iron ore has fallen nearly 40 pct this year * Traders clearing ore stocks, mills buying hand to mouth - trader By Manolo Serapio Jr SINGAPORE, Sept 11 (Reuters) - Iron ore futures in China and Singapore slipped on Thursday, adding to recent steep losses, amid abundant supply and slower growth in Chinese demand that have slashed spot prices of the steelmaking raw material by nearly 40 percent this year. The weaker steel market in China, the world's biggest consumer and producer, is also a major strain for iron ore, with slower consumption prompting steel mills to cut prices for next month. Iron ore for January delivery on the Dalian Commodity Exchange was off 0.2 percent at 584 yuan ($95) a tonne by midday, not far above a contract low of 570 yuan reached on Wednesday. The November iron ore contract on the Singapore Exchange dropped half a percent to $82.07 a tonne. Along with miners unloading cargoes in the spot market, Chinese traders are also clearing their stocks at the ports, piling further pressure on prices, traders said. "Quite a few traders in Tangshan and Tianjin are clearing their port stocks, selling some cargoes at a loss as prices could fall some more," said an iron ore trader in Shanghai. Most mills buying iron ore are doing so hand to mouth, choosing delivery dates that are closer to the time that they would need the material instead of stocking up ahead, he said. Top miners Vale and Rio Tinto are offering cargoes at separate tenders on Thursday, according to traders who have seen details of the offers. Vale, the world's biggest iron ore producer, is offering 135,000 tonnes of 62.99 percent grade Brazilian iron ore and 77,000 tonnes of 64.49 percent grade material. Second-ranked Rio is selling 170,000 tonnes of 61 percent grade Australian Pilbara iron ore fines. Morgan Stanley has projected a global supply surplus of 79 million tonnes this year, 158 million tonnes in 2015 and 256 million tonnes in 2018. "Recent price falls in iron ore do appear to be forcing higher-cost coastal Chinese mines to close, but others continue to shoulder losses and/or maintain financial support from provincial governments," Australia and New Zealand Banking Group said in a note. Iron ore for immediate delivery to China .IO62-CNI=SI fell 1.2 percent to $82.20 a tonne on Wednesday, its lowest since September 2009, according to data compiled by Steel Index. The price of the raw material that is the biggest revenue earner for both Vale and Rio has dropped 38.8 percent this year. Baoshan Iron and Steel, China's second-biggest steelmaker, said on Wednesday it will cut prices of its main products for October delivery by 100 yuan a tonne, after keeping them flat over the past three months. "Our steel mill clients are telling us that they have enough orders for September and October so they're quite cautious in buying more iron ore," said the Shanghai trader. Japanese trading house Mitsui & Co may miss the current year's profit target of $1.1 billion for its metals business due to the slump in iron ore, warned a senior executive, who said prices may fall to as low as $80 a tonne before rebounding. Mitsui had an annual iron ore output of 51 million tonnes in the last business year to March 31 through its equity holdings in mines. The most-traded rebar contract for January delivery on the Shanghai Futures Exchange was down 0.3 percent at 2,765 yuan a tonne. The contract touched a record low of 2,725 yuan on Wednesday. Rebar and iron ore prices at 0448 GMT Contract Last Change Pct Change SHFE REBAR JAN5 2765 -8.00 -0.29 DALIAN IRON ORE DCE DCIO JAN5 584 -1.00 -0.17 SGX IRON ORE FUTURES OCT 82.07 -0.43 -0.52 THE STEEL INDEX 62 PCT INDEX 82.2 -1.00 -1.20 METAL BULLETIN INDEX 82.22 -1.28 -1.53 Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day (1 US dollar = 6.1303 Chinese yuan) (Editing by Muralikumar Anantharaman)
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