Chronicle of a Bust Foretold as Iron Ore Futures Slide Below $50 – by Jasmine Ng (Bloomberg News – May 10, 2016)

Iron ore sagged again on Tuesday, fulfilling widespread expectations that a bust would follow a brief boom as a trading frenzy in China unwound and swelling inventories revived concerns about oversupply.

The SGX AsiaClear contract for June settlement sank as much as 2.3 percent to $49.85 a metric ton in Singapore, the lowest since March 16, and traded at $51.25 at 3:20 p.m. local time. In Dalian, iron ore futures closed 0.6 percent lower as steel in Shanghai tumbled for the fifth time in six days. In Sydney, BHP Billiton Ltd., Rio Tinto Group and Fortescue Metals Group Ltd. all fell.

Iron ore soared in April after Chinese investors dived into raw-material futures, spurring forecasts that the excessive enthusiasm would prove too much for fundamentals to justify.

After Chinese authorities introduced trading curbs in local markets, benchmark spot prices from Metal Bulletin Ltd. lost 22 percent in less than three weeks. Recent data show rising holdings of iron ore at ports in China and of inventories of reinforcement bar.

“It was inevitable that prices would drop,” Philip Kirchlechner, director of Iron Ore Research Pty in Perth, said by e-mail. Even when this new rising trend started after Chinese New Year, “some industry observers and mills were a bit incredulous, saying ‘cannot be sustained.’ And yet it kept rising,” he said.

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