Iron ore glut keeps growing, price smacked again

By Jasmine NgVale Iron+ore+mining

(Bloomberg) — Iron ore was poised for its largest weekly decline since early April on concern that rising output from the world’s largest producers will exceed demand from China and widen a global surplus.

Ore with 62 percent content delivered to Qingdao has dropped 5.6 percent this week to $57.91 a dry metric ton, the most since the period ended April 3, according to Metal Bulletin Ltd. While the price climbed 1.4 percent yesterday, snapping seven days of losses, it remains 70 percent below a record $191.70 in 2011.

The world’s biggest miners Vale SA and Rio Tinto Group boosted low-cost supplies into a saturated market, seeking to cut unit costs and protect market share. Prices rebounded as much as 34 percent from a decade-low of $47.08 on April 2 and some mines took advantage of higher prices to restart output, according to Citigroup Inc. With Chinese demand set to remain weak, the bank recommended investors bet on price declines.

“It doesn’t seem the surplus will be alleviated this year as supplies are still increasing,” Ren Xinlei, an analyst at Luzheng Futures in Jinan, China, said on Thursday.

Australia’s Atlas Iron Ltd., which suspended output last month after iron ore plunged, will resume operations as prices rebounded. The company will boost annual output to as much as 15 million tons by year-end, Perth-based Atlas said May 15. Australia’s fourth-largest producer will reduce its break-even price to $50 a ton from about $60, it said.

Iron ore supply will increase by about 100 million to 110 million tons this year, exceeding demand growth of 30 million to 40 million tons, Alan Chirgwin, BHP Billiton Ltd.’s vice president of iron ore marketing, told a conference in Singapore last week. The seaborne glut will widen to 215 million tons in 2018 from 45 million this year, UBS Group AG estimates.

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