Iron Ore Drops Below $85 for First Time Since '09 as China Slows

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Release: 2014-09-05 10:43

Iron ore declined below $85 a metric ton for the first time in five years as China’s economy, the world’s biggest buyer, showed signs of losing momentum amid an expanding global glut.

Ore with 62 percent content at the Chinese port of Qingdao dropped 1.7 percent to $83.80 a dry ton today, sliding to the lowest level since September 2009, according to data compiled by Metal Bulletin Ltd. The raw material decreased for a fifth week in the longest run of losses since May.

Prices tumbled 38 percent this year as Vale SA, Rio Tinto Group (RIO) and BHP Billiton Ltd. (BHP) increased production, pushing the market into a glut. Data this week showed manufacturing in China, which buys 67 percent of seaborne ore, slowed in August, joining weaker credit, production and investment data in suggesting that economic growth is faltering. New-home prices fell in July in almost all cities that the government tracks, according to the National Bureau of Statistics.

“China’s steel production is growing at a slower pace this year due to the slowdown in the property sector,” Helen Lau, an analyst at UOB Kay Hian Ltd. in Hong Kong, said by phone. “This causes demand for iron ore to be sluggish.”

The world’s biggest producers are targeting record shipments, betting that the increase will offset plunging prices and force less competitive mines to close. About a quarter of global supply is break-even or loss-making at prices now and production cuts are happening, according to UBS AG.

“There is a market-share battle and the high-cost guys do need to make way for low-cost production,” Daniel Morgan, a Sydney-based UBS analyst, said today in a Bloomberg Television interview. “Prices at the moment are falling and risk is to the downside in the very short term. That’s one to two months.”

Source: Bloomberg

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