Iron Ore at Risk of Losing All of 2016’s Gains as Slump Deepens – by Jasmine Ng (Bloomberg News – June 2, 2016)

Iron ore is at risk of losing all of this year’s gains.

Ore with 62 percent content fell 0.5 percent to $48.18 a dry metric ton on Thursday after posting the biggest monthly loss in about five years in May, according to Metal Bulletin Ltd. The drop has left prices that topped $70 in April less than $5 above 2015’s close.

The raw material has been whipsawed this year as signs of a demand revival in China spurred a speculative rally that lifted prices in the three months to April. The climb was reversed after a regulatory crackdown and as supply increased, raising volumes at ports. With output expanding, there’s a possibility that 2016 will prove to be another losing year, according to Shenhua Futures Co.

“It seemed clear at the start of 2016 that iron ore was set to face another challenging year but the outlook has since been muddied by the surprise rally,” said Wu Zhili, a Shenhua analyst. “Demand remains weak and supply is still increasing. There’s a good chance prices will end the year lower.”

Should that forecast prove prescient, 2016 would become a fourth year of lower prices. Iron ore fell in the three years to 2015 as rising low-cost mine supply in Australia and Brazil combined with a slowdown in China to hurt prices. They bottomed at $38.30 in December.

Goldman Sachs Group Inc. has warned the global market faces a rising surplus as miners will increase low-cost supply, while China’s steel output slows.

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