Iron ore futures prices extended their declines on Tuesday, as the big Simandou project in Guinea, West Africa, shipped its first ore, raising the prospect of more supply at a time when demand in top consumer China is set to decline amid falling steel output.
The most-traded iron ore contract on China’s Dalian Commodity Exchange TIO1! closed daytime trading down 0.72% at 757.5 yuan ($107.22) a metric ton.
It touched its lowest since July 10 at 750 yuan earlier in the session and headed for a fifth straight session of losses.
The benchmark January iron ore (SZZFF6) on the Singapore Exchange fell for a third consecutive session, down 0.35% to $101.7 a ton, as of 0940 GMT, its lowest since November 12.
The first shipment from the Simandou project has set sail from Guinea, Rio Tinto RIO, RIO, the world’s largest iron ore supplier, said on its WeChat account on Monday.
The project is set to be the world’s largest mine for the highest grade of iron ore, with an annual production capacity of 120 million tons.
Supply from Australia and Brazil, the two major iron ore suppliers, accounts for 80% of China’s iron ore imports.
The share will likely fall with more supply from Guinea, analysts said.
The near-month contract will face further pressure amid high supply, swelling inventory and diminishing demand, analysts at broker Xinhu Futures said in a note.
Crude steel output in China is expected to fall below 1 billion tons this year, the first in six years.
Other steelmaking ingredients coking coal and coke (DCJcv1) extended falls, down 2.21% and 2.7%, respectively, amid lingering concerns over increasing supply.
Most steel benchmarks on the Shanghai Futures Exchange declined. Rebar RBF1! lost 1.57%, hot-rolled coil EHR1! shed 1.42%, stainless steel dipped 0.32% while wire rod (SWRcv1) added 0.38%.
Source: Reuters