Iron ore extends losses as Simandou project starts supply

BEIJING: Iron ore futures prices extended declines on Tuesday, as the big Simandou project in Guinea, west Africa shipped its first ore, raising prospects of more supply at a time when demand in top consumer China is set to decline amid falling steel output.

As of 0229 GMT, the most-traded iron ore contract on China’s Dalian Commodity Exchange (DCE) was down 1.51% at 751.5 yuan ($106.28) a metric ton, its lowest since July 10 and heading for a fifth straight session of losses.

The benchmark January iron ore on the Singapore Exchange fell for a third consecutive session, down 0.94% to $101.1 a ton, as of 0219 GMT, its lowest since November 10.

The first shipment from the Simandou project has set sail from Guinea, the world’s largest iron ore supplier Rio Tinto said on its WeChat account on Monday.

The project is set to be the world’s largest mine for the highest grade of iron ore with an annual production capacity of 120 million tons.

Supply from Australia and Brazil, the two major iron ore suppliers, accounts for 80% of China’s iron ore imports.

The share will likely fall with more supply from Guinea, said analysts.

The near-month contract will face further pressure amid high supply, swelling inventory and diminishing demand, analysts at broker Xinhu Futures said in a note.

Crude steel output in China is expected to fall below 1 billion tons this year, the first in six years. Other steelmaking ingredients coking coal and coke extended falls, down 2.39% and 2.67%, respectively, amid lingering concerns over increasing supply.

Most steel benchmarks on the Shanghai Futures Exchange declined.

Rebar lost 1.5%, hot-rolled coil shed 1.27%, wire rod dipped 0.38% and stainless steel was little changed.