Iron Ore Succumbs to Bear Market and May Extend Slump Into $50s – by Jasmine Ng (Bloomberg News – September 25, 2017)

Iron ore has slumped back into a bear market after posting the biggest weekly loss in 16 months amid concern that record demand in China may ease off as mills enact winter output cuts just as data from the top user signals that the economy may be cooling.

Losses have probably been driven by “the realization that if, as planned, large amounts of steel capacity are taken offline during the winter months, this will mean lower demand for iron ore,” Caroline Bain, chief commodities economist at Capital Economics Ltd., said by email. “August activity and spending data suggested that the Chinese economy is starting to slow.”

Spot ore with 62 percent content in Qingdao slipped 0.8 percent to $63.06 a dry metric ton on Monday, after retreating 12 percent last week, according to Metal Bulletin Ltd. Prices have lost more than 20 percent since peaking near $80 in August, meeting the common definition of a bear market. Lower-grade 58 percent ore, which trades at a discount, has sunk into the $30s.

Iron ore is in retreat after a tumultuous year that’s seen the commodity surge in February and again in June-to-August only for gains to be rolled back.

While Chinese steel output has been running at a record pace, aiding iron ore, policy makers plan to order production cuts over winter to curb pollution. Last week, Australia’s central bank predicted weaker iron prices, flagging risks including rising supplies as well as concern that China may be nearing peak steel.

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