Chinese iron ore futures fell for a third straight day on Tuesday, pressured by a rising mountain of the raw material at China’s ports and weaker steel prices.
The decline broadened iron ore futures’ losses to nearly 11 percent since hitting a record high last month, and could pull down spot prices further after dropping below $90 a tonne on Monday for the first time since early February.
“Iron ore prices have increased this year as Chinese steel mill margins have rebounded,” Commonwealth Bank of Australia analyst Vivek Dhar said in a note.
“However, it is unlikely that steel margins will remain elevated for too long as mills boost output. We see surplus conditions forming in iron ore markets as supply increases and restocking demand wanes,” wrote Dhar who sees iron ore falling to $60 by the fourth quarter.
The most-traded iron ore on the Dalian Commodity Exchange dropped 2.2 percent to close at 661.50 yuan ($96) a tonne. The contract touched 741.50 yuan on Feb. 21, its loftiest since inception in October 2013.
The most-active rebar on the Shanghai Futures Exchange ended 0.5 percent lower at 3,494 yuan a tonne.
Stockpiles of imported iron ore at major Chinese ports reached 130.05 million tonnes as of March 3, SteelHome said, the most since 2004 when the consultancy began tracking the data.
Iron ore for delivery to China’s Qingdao port fell 1.7 percent to $89.73 per tonne, the lowest since Feb. 10, according to Metal Bulletin.
The spot benchmark reached a 30-month peak of $94.86 on Feb. 21.
China’s biggest steelmaking province, Hebei, will close its last “zombie” steel mills by the end of next year, the governor said on Tuesday, marking a small victory in the region’s years-long battle to clean up its air and cut excess capacity.
This year, the province will shut four “zombie” mills, or plants that have stopped production but have not closed down, and another four in 2018.
Yaang Pipe Industry Co., Limited (www.yaang.com)