Iron ore prices crash to six-year low after China lowers its growth forecast
SYDNEY—As China’s top officials heralded a new era of slower growth, iron ore, a resource that has powered years of breakneck expansion in the world’s second-largest economy, bore the brunt of ill sentiment in commodity markets.
The steelmaking ingredient’s value crashed to a six-year low late Thursday, after China lowered its economic growth forecast, reigniting concerns about its appetite for the raw material at a time when supplies are already outpacing demand.
Some of the world’s biggest miners, including Rio Tinto PLC and BHP Billiton Ltd. , have been aggressively expanding their operations in the Pilbara iron-ore mining hub of northwest Australia, betting that China will still need more of the commodity to make steel for its skyscrapers and for industries such as auto manufacturing.
But with China’s growth already slowing, their expansion has resulted in an emerging iron ore glut.
Beijing has now further rattled the market by lowering China’s annual growth forecast to 7%–down from last year’s goal of about 7.5%, and actual growth of 7.4%. Chinese leaders are now talking of a “new normal” for the economy.
The price of iron-ore shipped to China fell 4.5% late Thursday, to $59.30 a metric ton, according to data provider The Steel Index. That was the lowest level since March 2009, when it hit $59.10 a ton.
Steel demand growth in China—which buys three in every five tons of iron ore traded by sea—last year was already at its slowest in more than a decade.
Premier Li Keqiang Thursday also vowed to cut industrial overcapacity and tackle pollution, measures traders worry will damp demand for iron ore.
“It is coming at a time when there’s more and more iron ore being dug up,” said James Wilson, a Perth-based analyst for stockbroker Morgans.
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