Iron ore futures struggle as oversupply woes linger

jueves 11 de septiembre de 2014 01:35 GYT
 

* 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)