Iron Ore Slumps as Supply Higher than Demand

Most-active iron ore futures in Singapore sank below $40 a metric ton for the first time on concern that the economic slowdown in China will cut demand as supplies from the largest miners climb.

The SGX AsiaClear contract for January fell 2.7 percent to $39.67 a ton at 4:34 p.m. in Singapore, heading for the lowest close since trading started in April 2013. On the Dalian Commodity Exchange, futures for May delivery sank 3 percent to end at 293.5 yuan ($45.88) a ton, a record low. 

The raw material has been pummeled since the start of 2014 as surging supplies from low-cost producers including BHP Billiton Ltd. and Rio Tinto Group in Australia and Brazil’s Vale SA combine with faltering demand in China to spur a glut. Losses in Singapore and Dalian could presage a drop in the benchmark price for spot ore in Qingdao, which will be updated later in the day. The latest sign of new supply came from Australia, with a vessel waiting offshore on Monday to load the first cargo from Gina Rinehart’s Roy Hill mine.

“Prices are likely to continue ‘taking it on the chin’, trending into the $30s,” Gordon Johnson, an analyst at Axiom Capital Management Inc. in New York said in a note received on Monday. He cited lower Chinese demand and rising supply, including from the probable start of Roy Hill.

via Bloomberg

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza