Stock markets don’t want to notice articles like this. Ignorance is bliss, we suppose. Notice that although prices are dropping, the big 3 iron ore producers are increasing production. That’s ominous, and its going on with other natural resources, notably oil. From Jasmine Ng at bloomberg.com:
BHP, Rio and Vale all post increases in quarterly production
Demand from China `remains tepid,’ MineLife’s Wendt says
Iron ore is showing signs of buckling again. Prices slumped to the lowest level in three months as the top producers announced increases in low-cost supply while data and comments from China pointed to further weakness in demand.
“All of this extra production out of ‘the big three’ will keep a lid on prices,” said Gavin Wendt, founding director and senior resource analyst at MineLife Pty Ltd. in Sydney. “China demand remains tepid and its steel industry is hurting under margin pressures.”
Iron ore is headed for a third year of losses, and the recent decline risks tugging prices below the trading range of $50 to $60 a metric ton that’s held since July, according to Westpac Banking Corp. Rio Tinto Group, BHP Billiton Ltd. and Vale SA, the three largest suppliers, all announced increases in quarterly output this month. China’s central bank on Friday cut benchmark rates and banks’ reserve requirements to boost a faltering economy after data this week showed crude-steel output contracted. The chairman of the second-largest producer flagged the potential for the country’s production to eventually slump 20 percent.
Weak Steel
“The downtrend in seaborne iron ore prices is accelerating,” according to a report from Australia & New Zealand Banking Group Ltd. on Friday. “Chinese steel mills are tightening their spending on the back of weak steel prices.”
Ore with 62 percent content delivered to Qingdao slid 1.1 percent to $51.62 a dry ton on Friday, dropping for a fifth day to the lowest since July 24, according to Metal Bulletin Ltd. Prices are 4 percent lower this week, having dropped for five of the past six weeks. The raw material bottomed at $44.59 on July 8, a record in daily price data dating back to May 2009.
BHP, the world’s biggest miner, said on Wednesday iron ore output jumped 7 percent to 61.3 million tons in the three months to Sept. 30, two days after Brazil’s Vale said it produced a record 88.2 million tons in the period. In mid-October, Rio reported third-quarter output rose 12 percent.
Vale reported a 15 percent drop in adjusted quarterly earnings before interest, taxes, depreciation and amortization on Thursday as slumping prices overshadowed efforts to focus on higher-quality deposits and cut costs. Prices for iron ore fell in line with lower global steel output, with China’s steel usage subdued by real-estate weakness, Vale said.
To continue reading: Iron Ore Is Buckling Again as Supply Jumps
