Iron ore prices are experiencing pressure by lowered demand from China. The IMF cut its economy growth forecast for China to 7.75%, down from 8%. The Organisation for Economic Co-operation and Development also trimmed its forecast to 7,8% from 8%. The Asian nations official Purchasing Managers Index (PMI) is due later this week, but the Advance Purchasing Managers Index last week showed a factory slowdown. This coupled with Chinese leaders saying they will tolerate a slower, but more ecological friendly, expansion drove copper and iron ore demand and prices down.
According to Joel Crane, a Melbourne-based analyst, iron ore prices may drop to $100 a ton after yesterday they slipped to a 7-month low of $112.90. “We do not think that we are headed toward as deep of an overshoot as we saw last August,” Crane wrote. “Regardless of the eventual floor that is found, once the dust is settled, we would view this as an excellent buying opportunity because mills will undoubtedly need to restock.”
Iron ore with 62% content delivered to the Chinese port of Tianjin dropped 4.2% yesterday. It was the lowest since October 16. Iron ore stockpiles at Chinese ports fell to 66.26 million on March 8, the lowest since March 2009. According to Westpac Banking Corp., there are concerns that Chinas domestic iron ore output will not have its usual mid-year surge.
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