IRON ore risks sinking below $60 (R692) a metric ton in the next two weeks, deepening a bear-market rout, as mills in China cut steel production before and during a national holiday, curbing demand as supplies expand further.
Prices may drop to less than $60 as factories and businesses shut for the week-long Lunar New Year break, and rebound after that, according to UBS Group and Shenhua Futures. China is the largest iron ore importer and biggest steelmaker, accounting for about half of global production.
The raw material collapsed in 2014 and extended declines this year as surging low-cost output from Rio Tinto and BHP Billiton spurred a glut just as growth in China slowed. Mills are closing earlier than normal amid weak sales before the holiday, which runs from February 18 to 24 this year.
“A drop below $60 is possible, though prices may find a bottom,” Wu Zhili, a Shenzhen-based analyst at Shenhua Futures, said yesterday. “Mills tend to cut output before the Spring Festival, which curbs demand for iron ore. The major producers in Australia and Brazil won’t readily reduce supply.”
Ore with 62 percent content at Qingdao, China, slumped 2.1 percent to $61.20 a dry ton on Monday. That’s the lowest on record dating back to May 2009. – Bloomberg