Cash iron ore prices may fall to about $70 a metric ton in the “near term” as China, the world’s biggest buyer, cuts purchases, said Rana Som, chairman of NMDC Ltd., India’s top producer of the steelmaking material.
“This could happen in a few days,” Som said in a phone interview from the southern city of Hyderabad, where NMDC is based. The forecast is 26 percent lower than this year’s peak rate of $95 without freight earlier this month, according to Macquarie Securities Ltd.
China’s stockpiles of iron ore to make steel are at 75 million tons, just 0.6 percent below levels last September, when they rose to the highest since at least 2006. The cash price for Australian iron ore delivered to China slumped 9.3 percent on Aug. 21 after Chinese steel prices declined.
Ore prices have likely “topped out” this year as steel prices fell, Liberum Capital analysts said on Aug. 17. The Baltic Dry Index, a measure of commodity-shipping costs, fell 27 percent this month on concern demand may be slowing.
Iron ore swaps for settlement this month traded at $98.31 a ton yesterday, according to SGX AsiaClear over-the-counter prices from Singapore Exchange Ltd. They indicate prices may drop to $87 by December.
Demand in India remains strong even as global sales slide, Som said. NMDC’s sales will rise more than 13 percent this financial year because of demand from local steelmakers, he said last month.
India’s steel production climbed 4 percent to 18.7 million tons in the four months ended July 31, Steel Secretary Pramod Rastogi said on Aug. 6.
NMDC shares, which more than doubled this year because of the government’s plan to sell a stake in the company, rose as much as 1.9 percent to 366.60 rupees and traded at 364.60 rupees, up 1.3 percent, as of 1:17 p.m. local time.
Source: Bloomberg
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