(Bloomberg) -- Iron ore slumped — following its fourth weekly loss in five — on concerns that a slowdown in steelmaking at Chinese mills, combined with record shipments from Australia and Brazil, would lead to a glut.
Futures dropped below $99 a ton in Singapore after shedding almost 3% last week. Chinese steel demand has been hurt this year as economic growth has slowed and the property crisis drags on. That’s driven benchmark product prices to multiyear lows, hurting mills’ profitability. Nationwide steel output in the first half trailed last year’s pace, with data for July due this week.
On the supply side, Australian miners exported a record tonnage through Port Hedland in June, smashing the previous peak at the world’s largest bulk-export terminal. In Brazil, producers set a record for shipments for the month of July. The countries are the two biggest exporters, dominating the market.
Iron ore is one of the worst-performing major commodities this year, losing more than a quarter of its value. In recent weeks, it’s traded either side of $100 a ton, a level that may force smaller, less-efficient miners to curb supply. At the same time, industry-leading producers — with vast scale and low costs-per-ton — will remain very profitable, although their share prices may drop.
“Investors are very pessimistic about iron ore prices right now,” said Wei Ying, an analyst at China Industrial Futures Ltd. Worsening losses at steel mills were fueling expectations that there would be more output cuts, she said.
Mills in Yunnan province called a meeting on Saturday in a bid to control steel output, researcher Mysteel Global reported, without saying where it got the information. The gathering was to address iron ore purchase costs given producers’ severe losses, with plunging prices of construction steel, it said.
Iron ore dropped 2.4% to $98.70 ton as of 2:41 p.m. in Singapore, as yuan-priced contracts in Dalian also retreated. Steel futures declined in Shanghai.
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