Iron ore contracts in Asia slumped to records amid speculation that mills in China are reining in steel production as they battle losses, slumping prices and tighter credit, hurting demand for the raw material that’s mainly shipped from Australia and Brazil.
“Steelmakers are going through a very difficult time and a number of them have halted output,” Dang Man, an analyst at Maike Futures in Xi’an, China, said by phone. “Given the poor credit conditions facing steel mills, they’ll only buy iron ore when they’re fairly confident the price drop can be arrested. Otherwise it’ll be another loss for them.”
Iron ore has been pummeled this year by rising low-cost supplies from Rio Tinto Group and Vale, and faltering demand for steel in China, where mills account for about half of the global production.