Iron ore declined to the lowest price since 2009 as China ordered some plants to cut output, controlling demand in the world’s biggest consumer as surging production aggravate a global surplus.
Ore comprising of 62% content sold at Qingdao dropped to 2% to $76.46 per dry metric ton on Wednesday, the lowest since 2009, Metal Bulletin Ltd data showed. The drop is an extension of two weeks of declines at the end of October.
The unprocessed ore declined 43% this year, doing worse than all 22 items in the Bloomberg Commodity Index, as manufacturers such as BHP Billiton soared supplies and fueled the glut. China instructed some producers halt production ahead of a conference of world leaders under the umbrella of the Asia Pacific Economic Cooperation in Beijing. According to Anglo American Plc, it may take up to 18 months for the prices to recover.
“Steel mills in north China should be working at a reduced rate due to the APEC meeting. That should be playing a role,” Bloomberg quotes analyst Christian Lelong of Goldman Sachs Group Inc in Sydney as saying.
The biggest economy in Asia will host the APEC summit in the capital from November 7-12, forcing authorities to order suspension of mill productions to enhance clean air during the event. The most affected by the factory closure include the provinces of Hebei, China’s biggest steel-manufacturing region near the capital and the third-largest, Shandong.
“Spot iron ore fell on ongoing concerns over weak demand around the APEC meeting in Beijing,” The Australian quotes analysts at ANZ Bank as saying in a note to clients. The analysts said confidence was also affected by a surge in iron ore inventories at Chinese ports.
Australia’s Tonny Abbot, US President Barak Obama and Russian President Vladimir Putin are among the heads of state expected to attend the APEC forum.
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