Iron ore rout to test $US100 a tonne markBloombergShare postIron...

Iron ore rout to test $US100 a tonne mark

Bloomberg

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Iron ore extended a slide as China’s economic prospects weighed on the steelmaking ingredient, with futures nearing $US100-a-tonne levels that could begin to squeeze out higher-cost producers.

The commodity plunged more than 5 per cent in Singapore on Wednesday, extending a rout that’s seen it slump from more than $US140 a tonne early this year on fears over China’s demand prospects. Steel consumption hasn’t ramped up as some investors had expected in March.

Spot iron ore slid another 2.8 per cent to $US102.55 a tonne on Thursday in Singapore.

The “first line of cost defence” for iron ore lies at about $US90 to $US95 a tonne, at which some non-mainstream producers would be loss-making, Citigroup Inc. analysts wrote in a note last month. The majors might pursue curtailments below $US75 to $US80, they said.

The main culprit in iron ore’s slide towards two digits has been weak demand prospects, which grew dimmer after China’s biggest annual political gathering of the year delivered only incremental pro-growth measures.

China’s real-estate woes continue to weigh on appetite for iron ore, with investors tracking the latest debt stress at major developers including China Vanke and Country Garden Holdings.

“Falling home sales and funding issues look structural, signalling little room for any improvement in this construction season,” Australia & New Zealand Banking Group wrote in a note.