The price of iron ore has extended its recent retreat, amid unrelenting negative sentiment about inventories of the steel-making raw material in China and demand for steel in the nation.
Iron ore slid 1.3 per cent to $US79.36 a tonne on Monday night, extending its pullback from its February 21 high of $US94.86 to more than 16 per cent. It’s now at its lowest since January 9; it ended 2017 at $US78.87 a tonne. China’s futures markets were closed due to a public holiday.
“Traders are now concerned about the physical capacity at ports and their ability to hold any additional iron ore if the current pace of increases continues,” ANZ said.
The latest price setback for iron ore also comes as China’s central bank seeks to cool the nation’s property market by gradually tightening monetary policy through liquidity controls and higher market interest rates. Over the weekend, the People’s Bank of China lifted rates for loans for small- and medium-sized financial firms.
In addition, there are concerns about what may emerge from this week’s meeting of China’s President Xi Jinping and US President Donald Trump in Florida. Mr Trump has been hammering away at China for months about the value of its currency and the loss of US manufacturing jobs, but has yet to take any concrete action. Mr Trump also has signalled that his administration plans to overhaul international trade practices.
According to the latest SteelHome survey, iron ore inventory at 46 Chinese ports stood at 132.10 million tonnes on March 31, down 0.35 million tonnes or 0.26 per cent from the previous week.
Credit Suisse analyst Matthew Hope last week said steel, and iron ore, fell mostly because speculators unwound bets as sentiment shifted. Mr Hope argued in a note that iron ore inventories were “not high” and, in contrast, steel inventory in China is “relatively depleted”.
Li Xinchuang, the vice-president of the China Iron and Steel Association, last week told a conference in Perth that he expects more volatility in the price of iron ore, forecasting a range of $US55 to $US90 a tonne in 2017, averaging about $US65 for the year. In part that reflects what Mr Li sees as the result of increased iron ore output in China, with producers chasing the earlier surge in prices, as well as increased global supply.
China imported 90.3 million tonnes of iron ore in March, according to vessel-tracking and port data compiled by Thomson Reuters Supply Chain and Commodity Forecasts.
If the estimate is matched by official customs figures, due next week, it will be only the fifth time that monthly imports have exceeded 90 million tonnes, the other occasions being January this year, November and September last year and in December 2015.