Iron prices plummet on supply concern
After a miserable May, iron ore is opening the new month on the back foot. Futures in Asia fell to the lowest level in seven months as rising concern about increased supplies steamrollered positive signs, including data from China that may signal record steel output in the top producer.
In Singapore, the SGX AsiaClear contract sank as much as 2.2% to $54.30/metric ton, the lowest since October, after an 18% drop. Futures in Dalian fell 1.1%. On Wednesday, benchmark spot ore retreated 2.5% to $57.02/ton in Qingdao, said Metal Bulletin.
The commodity has been on a wild ride, coming close to challenging the $100 level in February before collapsing over the next three months as investors sought to gauge the impact of greater supply and the outlook for steel demand in China. A manufacturing gauge for the world’s largest steel industry rose to the highest in a year, suggesting another month of bumper production.
“Cargoes from the four largest exporters have remained at high levels, causing port inventories to repeatedly hit new highs,” said analysts at Maike Futures, a Chinese brokerage. While steelmakers may be churning out record output, “they’re making hand-tomouth purchases of raw materials. Iron ore’s fundamentals are pretty weak.”
Iron ore has dropped even as mills in China boosted output to an all-time high in April. The data on Wednesday showed the industry’s purchasing manager’s index rose to 54.8 in May from 49.1 a month earlier, as an underlying gauge of production jumped to 58.2 from 56.2. Readings above 50 show expansion. – Bloomberg