By Rhiannon Hoyle
Iron-ore prices sank to a near five-and-a-half year low and
mining company shares fell, as cutbacks to steel output ahead of
the Asia-Pacific Economic Cooperation forum in China dented demand
for the steelmaking commodity.
Beijing hustled to "ensure cleaner air" before the summit, when
major world leaders would descend on the city, said Commonwealth
Bank of Australia analyst Lachlan Shaw. The move prompted heavy
industry, such as steel plants, to pare production. Before the
push, residents in China's capital endured some of the year's worst
air pollution over the past two months.
Iron ore fell 1.4% Wednesday to US$76 a metric ton, according to
data provider The Steel Index, and is now down 43% year-to-date. It
is the benchmark's lowest value since June 2009.
The plunge is also battering the value of companies that mine
the raw material, like Australia's Fortescue Metals Group Ltd.
(FMG.AU) and Atlas Iron Ltd. (AGO.AU). Their stock prices fell 8.5%
and 17%, respectively, Thursday. China is the world's largest
iron-ore buyer.
RBC Capital Markets says a glut of the commodity, including the
availability of cheap stocks sitting at major Chinese ports,
continues to weigh on prices. Australian mining companies like
Fortescue and Rio Tinto PLC (RIO.LN) have boosted production to
record rates as new mines planned when prices were booming become
operational.
Still, seasonal inventory restocking ahead of winter in the
Northern Hemisphere, which tends to disrupt shipments each year as
temperatures plummet, should help support prices heading toward
year-end, RBC said in a note.
Write to Rhiannon Hoyle at wsj.com
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