Iron Ore Extends Rout as China Slows, Banks Reduce Forecasts – by Jasmine Ng (Bloomberg News – January 26, 2015)

http://www.bloomberg.com/

Iron ore retreated to the lowest level in more than five years as a slowdown in China hurt the outlook for demand in the world’s biggest user while the largest mining companies add to supply, boosting a surplus.

Ore with 62 percent content delivered to Qingdao, China, tumbled 4.3 percent to $63.54 a dry metric ton, according to data by Metal Bulletin Ltd. That’s the lowest price on record going back to May 2009, and was the biggest one-day fall since Nov. 18. The commodity is 11 percent lower this year.

The raw material has been in a bear market since March after Rio Tinto Group (RIO), BHP Billiton Ltd. and Vale SA spent billions of dollars to boost low-cost output even as China slowed. Goldman Sachs Group Inc. joined global banks on Friday in cutting price forecasts for 2015, predicting a return to a bull market is probably more than a decade away. The love affair between China and iron ore is cooling, the bank said.

The decline in prices is mainly due to “slower demand growth for steel in China, together with the expected new iron ore supply,” Vanessa Lau, a Hong Kong-based analyst at Sanford C. Bernstein Ltd., said before the figure was released. Steel mills in China are also cutting output before the Lunar New Year, putting further pressure on prices, she said, referring to the national holiday next month when industrial activity slows.

The commodity may average $66 a ton this year from an earlier prediction of $80, Goldman Sachs said in the Jan. 23 report. The New York-based bank is at least the fifth lender this month to lower price estimates after Citigroup Inc. and UBS Group AG were among those cutting forecasts.

Slowest Pace

Gripped by a property downturn and excess capacity, China’s economy expanded 7.4 percent last year, the slowest pace since 1990, data on Tuesday showed. Crude-steel production rose 0.9 percent in 2014 compared with 7.5 percent the previous year, according to China’s National Bureau of Statistics. That was the weakest growth in steel output in data going back 24 years.

For the rest of this article, click here: http://www.bloomberg.com//news/2015-01-26/iron-ore-extends-collapse-as-china-slowdown-hurts-demand-outlook.html