Iron ore extended losses for a fifth day to a five-month low on speculation Chinese mills are drawing on stockpiles as declining steel prices cut their profits, according to Macquarie Research.
Ore with 62 percent iron content at the Chinese port of Tianjin fell 1.1 percent to $125 a dry metric ton, according to The Steel Index Ltd. The benchmark price retreated 21 percent from a 16-month high on Feb. 20, data show.
Stockpiles at Chinese ports are at a record low, and those at small steel mills fell to 20 days of use, Macquarie said in an e-mailed report today. Declining steel prices are squeezing mills’ margins, and June maintenance will probably lead prices lower before July, while supplies will also expand in the second half of the year, according to the report.
“Steel prices in China are falling, hurting steel mill margins,” Macquarie said in the report. “Adding this to the expectation that mills will take maintenance downtime during June means that the seeds are in place for a downturn in iron ore in the near term.”
June swaps fell 0.8 percent to $120.50 a ton as of 12:25 p.m. in London, according to GFI Group Inc., a broker.
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