“Iron ore slumped into a bear market on concern that slowing economic growth in China, the world’s biggest buyer, will reduce demand as global supplies increase.
Ore with 62 percent iron content delivered to the Chinese port of Tianjin fell 1.3 percent to $126.40 a ton today, according to The Steel Index Ltd. The benchmark price has lost 20 percent since Feb. 20, when it reached a 16-month high of $158.90, meeting the common definition of a bear market.
China’s April industrial output trailed estimates and fixed-asset investment slowed, data showed this week, after economic growth unexpectedly contracted in the first quarter. Bank of America Corp. reduced its estimate on China’s 2013 gross domestic product growth to 7.6 percent from 8 percent.
“Chinese macro data has been worse than expected,” Daniel Hynes, Sydney-based head of commodity strategy at CIMB Group Holdings Bhd. (CIMB), said before today’s price decline. Rio Tinto Group’s planned expansion of its iron ore operation in Australia “brings focus back on the supply side which, from an Australian point of view, is growing strongly,” he said by phone today.
Prices will decline as supplies expand faster than demand over the long term, Alan Chirgwin, general manager of iron ore marketing at BHP Billion Ltd. (BHP), said May 8. Low-cost supplies mainly from Australia and Brazil will replace more expensive output and eventually exceed Chinese demand, he said.
