Iron ore at 2-week low as China demand slips, swaps down

Iron ore swaps dropped on Tuesday after spot prices hit two-week lows with demand from top buyer China losing steam after weeks of restocking, prompting miners to unload more cargoes onto the spot market before prices fall further.

Top miners Vale, Rio Tinto and BHP Billiton are together offering around 600,000 tonnes of iron ore at spot tenders closing today, traders said, far more than usual volumes.

The December swap contract cleared by the Singapore Exchange edged down to US$115.50 per tonne in early deals after falling more than a dollar to US$115.72 on Monday, brokers said.

Iron ore with 62 per cent iron content fell 1.2 per cent to US$122.25 a tonne on Monday, its lowest since November 6, according to data provider Platts.

Chinese steel mills had stocked up on iron ore over the past four weeks on hopes of positive policy signals from China’s 18th party congress. The meeting, however, ended last week without any indications of economic stimulus, said a physical iron ore trader in Singapore.

“And all this time, steel consumption has remained fundamentally weak, so now that mills are well stocked with iron ore, there’s no incentive to procure more spot cargoes,” the trader said.

“I believe sentiment will start to weaken from this point onwards,” he said, adding he expects the benchmark iron ore price to drop to US$115 in the near term.