Iron ore returned to a bear market in the longest run of losses in 10 months, after a rebound in Chinese port stockpiles hurt the outlook for prices as the biggest miners increase production and demand slows.
Ore with 62 percent content delivered to Qingdao retreated 5.4 percent to $52.28 a dry metric ton on Monday, extending last week’s 11 percent tumble, according to Metal Bulletin Ltd. Prices, which entered a bull market in April, fell an eighth day in the longest losing streak since Aug. 29.
The drop eroded gains in the second quarter, when prices climbed from a decade-low as producers’ shipments missed expectations. Holdings at ports in the largest buyer rose last week for the first time since April amid a deeper slowdown in China’s steel industry and further increases in low-cost output from BHP Billiton Ltd. and Vale SA. Prospects for a widening global glut may cause prices to plunge into the $30s this half, according to Capital Economics Ltd. and Citigroup Inc.
“Inventories should start to pick up again,” Daniel Kang, an analyst at JPMorgan Chase & Co. in Hong Kong, said by phone on Monday before the release of the price data, citing increased exports. “That should in turn put some pressure on iron ore.”
Prices are down more than 20 percent from a high set June 11, meeting the common definition of a bear market. They’d rebounded from as low as $47.08 on April 2, aided by lower-than- expected shipments from Australia and Brazil and tumbling stockpiles in China, according to Goldman Sachs Group Inc.
Inventories at Chinese ports climbed 2.8 percent last week to 81.55 million tons after 11 weeks of declines, according to data from Shanghai Steelhome Information Technology Co. The stockpiles contracted 21 percent in the three months to June, supporting iron ore’s 16 percent rally over the same period.
Falling steel prices and output in China will make it difficult for iron ore prices to rally again, according to the China Iron & Steel Association. Local iron ore output climbed 13 percent in May, the association said in a monthly report on Monday, signaling that some higher-cost Chinese mines took advantage of the second quarter rally to boost production.
Shares in Rio Tinto Group dropped as much as 2.3 percent in London to 2,545 pence, the lowest level since October 2009, and traded at 2,561 pence at 2:01 p.m. local time. BHP sank as much 2.2 percent, while Anglo American Plc lost 1.9 percent.
The drop in iron ore prices on Monday came as investors sold raw materials as China’s attempts to halt a stock crash and Greece’s vote against further austerity shook confidence in global economic growth. The Bloomberg Commodity Index fell as much as 2.6 percent.
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