SHANGHAI/SINGAPORE: Spot iron ore prices lost more ground on Friday as steel mills in top buyer China continued to limit purchases in anticipation of slackening steel demand, dragging down key global iron ore indexes to their lowest in nearly three months.
Weaker steel demand in the summer as well as high iron ore inventories at Chinese ports have dampened steel mills' interest to build up stockpiles.
"Chinese buyers remain hesitant in the face of looming power cuts to the steel industry over China's peak summer power demand season in July and August," Commonwealth Bank of Australia said in a research note.
Offers for Australian Newman iron ore fines with 62 percent iron content dropped to $173-$175 a tonne, including freight, on Friday from $174-$176 on Thursday, Chinese consultancy Umetal said.
Offers for Indian 63.5/63 percent iron ore fines were steady at $176-$178 a tonne.
"Some traders are trying to clear some inventories by selling at losses because they expect the market's downward trend to continue," said an iron ore trader in eastern China's Shandong province.
Two Australian 165,000-tonne cargoes of 61-grade iron ore fines were sold in the spot market on Wednesday, traders said.
The first was sold at $169.75 per tonne, for loading in China's Qingdao port on July 5-14, and the second at $169.25 a tonne, for loading on July 7-16 also in Qingdao, traders said.
Key iron ore indexes, tracking spot Chinese transactions and used by global miners in pegging supply contract prices, fell on Thursday.
Platts 62 percent iron ore index declined 75 cents to $170.75 a tonne and a similar gauge by Metal Bulletin eased 7 cents to $169.62, both the lowest since March 29.
The Steel Index's 62 percent benchmark fell $1 to $170.90.
Tighter supplies from India, the world's No. 3 iron ore supplier, during the monsoon season that lasts through September are expected to limit declines in spot prices, traders said.
Gains in iron ore swaps on Thursday, after recent losses, reflect investor optimism that losses in spot prices could be in check.
Prices for swaps cleared by the Singapore Exchange all rose from the June 2011 through the December 2013 contracts, with the biggest gains seen in swaps from July through December 2011.
Copyright Reuters, 2011
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