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Iron ore languishes at 4-month low with no recovery seen in steel

Iron ore languishes at 4-month low with no recovery seen in steelMANILA: Iron ore futures in China and Singapore edged lower on Thursday, putting more pressure on spot prices that have sunk to their weakest level since July with no near-term recovery seen in Chinese steel demand.

Shanghai steel futures dropped to a record low on falling demand in China due to a slowing economy, with the approach of winter expected to keep appetite weak.

“We expect China’s steel prices to continue to drift lower during the weak winter season,” said Helen Lau, analyst at Argonaut Securities in Hong Kong.

Construction-used rebar on the Shanghai Futures Exchange closed flat at 1,776 yuan ($ 280) a tonne, after touching 1,768 yuan. That was the lowest for a most-traded contract since the bourse launched rebar futures in 2009.

China’s steel demand dropped 5.8 percent in January-September, according to the China Iron and Steel Association (CISA).

Amid weakening demand from the world’s top steel consumer, China’s crude steel output is expected to fall to 780 million tonnes by 2020, CISA said on Wednesday. Output last year reached 822.7 million tonnes.

“We believe the recovery in steel prices holds the key to any recovery in iron ore prices,” ANZ Bank wrote to clients.

Iron ore for immediate delivery to China’s Tianjin port fell 0.8 percent to $ 48.30 a tonne on Wednesday, a level last seen on July 9, based on data published by The Steel Index (TSI).

The spot benchmark has only risen once in the past 17 sessions, and is on track to return to this year’s low of $ 44.10. That was the lowest price on TSI records that date back to November 2008.

On Thursday, iron ore for January delivery on the Dalian Commodity Exchange fell 1 percent to end at 345.50 yuan per tonne. On the Singapore Exchange, the most-active December contract dropped 1.4 percent to $ 44.70 a tonne by 0707 GMT.

Rio Tinto, the world’s No. 2 iron ore miner after Vale, said it expects to see strong growth in iron ore demand in countries outside China as the global seaborne market expands.

Copyright Reuters, 2015

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