Business / Industries

Weak demand keeps iron ore price low

(Agencies) Updated: 2015-04-08 08:51

China's apparent steel demand fell about 5 percent in the past six months from a year earlier, the biggest drop since the global financial crisis, Goldman Sachs Group Inc said in a report on Monday.

The bank is increasingly concerned about the signal sent by the weakness in Chinese steel demand for commodity consumption, according to the report, which cited a lack of growth in property starts, and focused on implications for copper, used in pipes and wiring.

While iron ore exports to China from Australia's Port Hedland rose 3.2 percent to 31.2 million tons in March from February, average daily shipments fell to 1 million tons from a record 1.08 million tons in February, according to Bloomberg calculations based on port authority data. China buys about two-thirds of seaborne iron ore, supplementing local output.

BHP Billiton will continue to add to supply for at least two years, the Australian newspaper reported last week, citing Jimmy Wilson, the Melbourne-based company's head of iron ore. The decline in prices below $50 a ton is part of a normal commodity cycle, Wilson was cited as saying.

Rio Tinto Group and BHP are boosting output to cut unit costs and retain market share, increasing pressure on higher-cost suppliers within China and overseas. Australia's Atlas Iron Ltd suspended its shares from trade in Sydney on Tuesday to review operations after iron ore's plunge.

Seaborne supply will exceed demand by 55 million tons this year, rising to 184 million tons in 2018, according to Morgan Stanley. The world's biggest mining companies will add 310 million tons of output through 2017, Deutsche Bank said on March 31, forecasting that iron ore will drop below $40.

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