Iron ore price in China likely to extend drop

BEIJING -- New analysis has showed China's iron ore price will continue to drop in the fourth quarter of this year amid a fall in demand.

Demand has usually shrunk in the fourth quarter every year, especially in north China, and the corresponding slack season for steel production may bring a short-term recession in demand for iron ore, according to a report in the Shanghai Securities News on Friday.

Stockpiles of iron ore at 25 major ports in China continued to grow last week, marking the fourth consecutive week of growth.

Inventories of imported iron ore stood at 77.82 million tons at the end of the October 29 to November 4 period, up 1.29 million tons, or 1.68 percent, from the previous week, according to industrial statistics.

Analysts said that the weak demand of steelmakers will continue as November is the slack season for the industry and it is unlikely that there will be large-scale purchase orders.

Analysts forecast that the ongoing Third Plenary Session of the 18th Communist Party of China Central Committee will bring positive policies to the industry and steel prices may rebound in the short term.

The country's domestic demand for iron ore increased in the first three quarters, and the production and import volume both soared during the January-September period this year.

The Shanghai Securities News cited a site stats report showing that the rate of domestic mining rebounded in the July-August period thanks to a considerable iron ore price in southern and northeastern China, while in eastern and northern China, the rate rose steadily with high enthusiasm among workers.

According to the National Bureau of Statistics, the domestic yield of raw ore stood at 136 million tons in September, with a quarter-on-quarter increase of 6.81 million tons, or 5.2 percent. And crude steel rose 11 percent year-on-year to 65.422 million tons.

However, domestic supply started reducing in November as Beijing triggered stricter environmental protection including reorganizing small and medium-sized mines in surrounding areas.

The latest customs data showed that imports of iron sand and concentrate added up to 74.58 million tons, a new record high. But following that iron price fall, the factories under financial pressure had to cut down importing.

The operation of new foreign mines may cause added supply pressure. Steel plants facing profit and financial stress tend to be much more cautious about replenishment and will generally keep a low inventory level, the Shanghai Securities News report added.