Iron ore spot prices could fall further as Chinese steel and iron ore stockpiles continue to grow. analysts say.
This would create further problems for Australian miners as they negotiate annual contracts.
ANZ is the latest commodity forecaster to warn of changing conditions in the Chinese steel market, saying it expects forecasts to be revised down in coming weeks.
"Economic data remains weak and steel inventories have turned sharply higher," ANZ's head of commodities research Mark Pervan said yesterday.
"The worry for iron ore and coal producers is that high steel stocks will allow steel consumers to delay purchases for some time -- creating further downward pressure on China steel prices and, ultimately, iron ore prices."
Figures released by the Australian Bureau of Statistics last week showed iron ore earnings jumped 15 per cent in January to $3.08billion -- the country's fourth-highest monthly total -- as spot prices rose, volumes increased and the dollar fell.
However, with spot prices down 20 per cent since early February and volumes down due to storms in the Pilbara, last month's numbers are expected to fall.
Iron ore spot prices into China fell 10 per cent last week to $US67.50 a tonne, according to Metal Bulletin. They are now sitting just above the low of $US63.50 in November as steel mills deferred shipments.
Mr Pervan, who is forecasting a 40 per cent drop in iron ore contract prices this financial year, said higher-end market forecasts of a 20-30 per cent cut would probably be revised down.
However, Macquarie analyst Jim Lennon said spot prices 40 per cent below contract volume looked to be driving too much production out of the market, while at a 20 per cent discount the market became oversupplied. "The equilibrium price is somewhere in between," he said in a report at the weekend.
Yesterday, Mr Lennon described a 3.4million tonne increase in Chinese port stockpiles last week to 62.5million tonnes as "by far the biggest weekly rise ever".
Source: The Australian
No comments:
Post a Comment