Global Econ Cooling: Iron Ore Keeps Collapsing-------Down to $75/ton From $200 Peak

From Bloomberg News

Iron ore capped the biggest weekly decline in more than five months amid expanding global surplus, with Vale SA’s opening of a port in Malaysia highlighting rising supplies and investments by the world’s largest shippers.

Ore with 62 percent content delivered to Qingdao lost 4.7 percent this week to $75.84 a dry metric ton, according to data from Metal Bulletin Ltd. The decline completed three weeks of losses, deepening a bear market. Prices, which rose 0.6 percent today to snap a five-day losing streak, reached $75.38 yesterday, the lowest since September 2009.

The raw material lost 44 percent this year as producers including Brazil’s Vale, the world’s largest shipper, and BHP Billiton Ltd. and Rio Tinto Group (RIO) in Australia expanded supplies and spurred the glut. Data this week showed record exports of the steel-making raw material from Australia’s Port Hedland last month. Mill closures ordered by China this week to curb air pollution for a global summit were also seen hurting demand.

“Demand in China is weak because some mills were asked to stop production before the APEC meeting,” Ben Cheung, head of metals at ABN Amro Group NV in Hong Kong, said before the price data was released. “The major producers are still expanding supply to try to increase market share. The over-supply situation doesn’t look like it will be alleviated next year.”

The seaborne market needs to absorb a surplus of about 110 million tons next year from 60 million tons in 2014, Goldman Sachs Group Inc. said in an Oct. 23 report. Global output will exceed demand by 100 million tons this year from 16 million tons in 2013, HSBC Holdings Plc said in an Oct. 22 report.

Vale’s Outlook

Vale, which is seeking to boost output by 50 percent, today inaugurated the $1.4 billion port in Malaysia, where its Valemax vessels will unload cargoes for onward shipping to clients in Asia in smaller vessels. Prices of $90 to $100 a ton are sustainable over the long term, Claudio Alves, Vale’s global director of ferrous marketing and sales, told reporters at the inauguration ceremony.

Iron ore shipped from Port Hedland, the world’s biggest bulk-export terminal, climbed to a record 37.5 million tons last month from 36.3 million in September and 28.9 million in October 2013, according to port authority data on Nov. 4. Exports to China were 31.7 million tons in October, near the record 32 million tons in August and 26 percent up on year.

A recovery in prices may take as long as 18 months, according to Anglo American Plc. The raw material will probably trade at $75 to $80 in the short term as new mines boost supply Paulo Castellari, chief executive officer of Anglo American’s iron ore unit in Brazil, said in an interview on Nov. 3.

Mills in north China should be working at a reduced rate due to curbs for the Asia-Pacific Economic Cooperation meeting, Goldman analyst Christian Lelong said earlier this week. That should be playing a role in iron ore’s drop, he said. Asia’s biggest economy is hosting the gathering in Beijing to Nov. 12.

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