China iron ore extends losses, logs biggest weekly drop in over 16 months
China’s iron ore futures logged their biggest weekly drop in more than 16 months on Friday, slumping for the seventh straight day amid stabilising supply from major miners.
The most-traded iron ore contract on the Dalian Commodity Exchange, for January 2020 delivery, fell as much as 5.4% to 628 yuan ($89.11) a tonne and closed down 3.8% on 639 yuan per tonne.
That marked a weekly loss of 12%, the most since the week ended March 23, 2018.
“Iron ore prices are actually stabilising after the big drop on Wednesday,” said Zhuo Guiqiu, analyst from Jinrui Futures, adding that the estimated average cost of production for domestic mines was at around 580-600 yuan per tonne, meaning “there’s not much space for another big decline.”
China’s iron ore imports surged 21% to 91.02 million tonnes in July from the previous month, the highest level since January, boosted by growing shipments from Australia and Brazil.
Meanwhile, the most-active October construction steel rebar on the Shanghai Futures Exchange fell 2.7% in morning trade to 3,613 yuan per tonne. It closed at 3,591 yuan per tonne on Friday, down 3.3%.
Steel inventories in China stood at 12.99 million tonnes as of Aug. 8, up 1.16 million tonnes, compared with a month earlier, according to data compiled by consultancy Mysteel.
Rebar oversupply has been getting worse since mid-June, Zhuo said, adding that prices need to go lower or mills need to cut production as a result, especially with environmental curbs becoming more lenient.
“The pressure is being passed on to upstream raw material (prices),” he said.
Benchmark spot 62% iron ore for delivery to China finished at $94.50 a tonne on Thursday, based on SteelHome data.
Hot-rolled steel, used in cars and home appliances, slipped 2% to 3,598 yuan a tonne.
Other steelmaking materials were mixed, with Dalian coking coal ending up 0.8% on 1,416 yuan, while coke fell 4.3% to 1,936 yuan a tonne.
China’s producer prices shrank for the first time in three years in July amid slowing demand at home and abroad, stoking deflation worries and putting pressure on Beijing to deliver more stimulus.
Utilisation rates at China’s steel mills across the country averaged 69.48% this week, up from 67.27% a week ago, according to Mysteel.
($1 = 7.0494 Chinese yuan)
(By Min Zhang, Tom Daly and Enrico Dela Cruz; Editing by Rashmi Aich and Uttaresh.V)