Iron ore and coking coal prices slumped to their lowest levels in more than a year on Wednesday as slowing demand, continued overproduction, and weak sales hit the Chinese industry.
The slide added to a very weak day for commodities in the wake of better-than-expected US consumer inflation data.
The price of 62% Fe fines on the SGX platform in Singapore fell to US$96.20 a tonne, the second-lowest this year (after US$96.03 a tonne in early April) and down from the peak of US$143 a tonne in early January.
This fall sets up another weak day for BHP, Rio Tinto, and Fortescue after their shares saw significant price falls on Wednesday. BHP shares lost 2.77%, Rio shares dropped 2.6%, and Fortescue shares shed more than 4.5%.
The price of prime Australian coking coal slumped to US$200 a tonne on the SGX platform, down 6% from Tuesday and the lowest in years. This is also bad news for BHP.
Mysteel, the Chinese raw materials website, reported a sudden buildup of coking coal stocks at a key border port between China and Mongolia. Mysteel said 3.51 million tonnes of high-grade coking coal was more than double the stock level a year ago and a sign of rapidly slowing demand from steel mills in northern China.
Wednesday’s price slump for iron ore followed dramatic statements from Chinese steelmaker Baowu, which warned of a “long and harsh winter” ahead for the steel industry. This put Australian iron ore miners on notice and sent the price of Australia’s top export tumbling for another session.
Adding to the pressures is the slump in the price of rebar, the basic reinforcing material for cement and construction generally. China’s property collapse has slashed demand for the key steel product, as has a change in quality levels by the Chinese government.
New quality rules for rebar, due to start later this year, have forced steel mills to sell off unwanted stocks of the product at knockdown prices, adding to the downward pressure on prices.
Mysteel reported on Wednesday that rebar prices are now around four-year lows and have fallen more than 20% so far this year.
The China Iron and Steel Association said crude steel output at its members’ mills was 1.9735 million tonnes per day in the period from July 21 to 31, down 8.1% from the prior 10-day period. The industry association blamed soft prices for products, led by rebar.
In New York, the Comex copper price eased to just over US$4 a pound, down 0.2% on the day. Comex gold slipped back under US$2,500 an ounce to settle around US$2,486 an ounce, and silver also fell, down 0.6% to US$27.61 an ounce.
And oil prices fell for a third day, losing ground on growing fears about weak Chinese demand and oversupply by OPEC and its allies. US West Texas Intermediate crude dropped 1.5% to US$7.16 a barrel, down from the most recent high of US$79.85 on Tuesday. Brent crude fell as well, settling around US$79.76 a barrel, down from the most recent high of over US$82 a barrel, also on Tuesday.
