Iron ore futures in China fell more than 3 percent to the lowest since July on Tuesday, dragged down by worries demand from the worldâ€™s top consumer may ebb as steel consumption cools.
Weaker futures, including those traded in Singapore, have tamed buying interest for prompt iron ore cargoes and could further pull down spot prices, already trading near this yearâ€™s trough below $50 a tonne. As winter approaches, more Chinese mills are likely to curb steel production, said a Shanghai-based iron ore trader. â€œConstruction activity in the northern part of China is going to drop dramatically in cold weather and that would reduce demand for iron ore,â€ he said.
The most-active January iron ore on the Dalian Commodity Exchange fell as much as 3.3 percent to 349 yuan ($55) a tonne, its lowest since July 28. It was off 3.1 percent at 350 yuan by 0301 GMT. On the Shanghai Futures Exchange, the most-traded rebar touched a new all-time low of 1,775 yuan a tonne and was last down 0.6 percent at 1,777 yuan. Chinaâ€™s steel demand fell 5.8 percent in the first nine months of 2015, in step with the slowdown in the worldâ€™s No. 2 economy.
Lean demand for the steelmaking raw material caused iron ore stocks at Chinaâ€™s ports to swell to the highest since end-May last week, reaching 84.75 million tonnes, according to industry consultancy SteelHome. SH-TOT-IRONINV Benchmark 62-percent grade iron ore for immediate delivery to Chinaâ€™s Tianjin port .IO62-CNI=SI dropped 0.8 percent to $49.10 a tonne on Monday, according to the Steel Index (TSI). The spot price touched a 16-week low of $49 last week, closing October with a monthly loss of 9 percent amid a global glut.
Adding to the glut are iron ore cargoes from India which is resuming exports after a three-year hiatus, while some Chinese mills that are aiming to cut costs in a gloomy market are keen to buy. Some mills are looking at Indian iron ore fines with iron content of less than 60 percent and hoping they can buy them cheaper than Australian material, said the Shanghai trader. â€œSome are thinking $2 (per tonne discount), although the worst Iâ€™ve heard is they need at least $4-$5 for them to consider,â€ he said.