Iron ore for January delivery on the Dalian Commodity Exchange touched a session low of CNY 670 per tonne, its weakest since June 20. It was down 1 percent at CNY 671 by midday.
CISA said that China buys around two thirds of the world’s iron ore and supply of the steelmaking raw material has exceeded demand this year. Iron ore supply in China outpaced demand by 52 million tonnes in the first half of 2014.
According to data compiler Steel Index which said mills retreated from the market, Benchmark 62% grade iron ore for immediate delivery to China .IO62-CNI=SI eased 0.3% to USD 95.60 a tonne on Thursday.
The price rose 1.9% in July, its second straight monthly gain. The price of the commodity that is the biggest revenue earner for global miners Vale and Rio Tinto has recovered from a 21 month low of USD 89 reached in June, but has struggled to bounce back to USD 100 since falling below that level in mid May.
A Shanghai based iron ore trader said that business is really tight right now and we’re hardly making any margin adding he has traded only two cargoes in July. Top miner Vale expects Chinese demand for iron ore to rise in the second half of the year, but its head of iron ore business Jose Carlos Martins said the company will focus less on the price and more on its capacity to deliver volumes and cut costs.
Weaker iron ore prices were largely behind 43% decline in Vale’s second quarter net profit even as the miner increased production to a record 79.45 million tonnes.
Australia and New Zealand Bank analysts said that buying interest continues to be sluggish as mills expect Australian supply to be plentiful in August, despite a marginal fall in port stocks in July.
With more than 110 million tonnes of stocks at Chinese ports, upside is expected to remain limited in the near term. The inventory of imported iron ore sitting at Chinese ports fell to 111.95 million tonnes on July 25 SH-TOT-IRONINV from 113.60 million tonnes the previous week, based on data compiled by SteelHome, which tracks stocks at 44 ports.
Source – Reuters