Iron Ore Spot Prices Decline Amidst Stalled Chinese Buying

Iron ore prices experienced a decline for the second time in three sessions, coupled with a further drop in offer prices, as Chinese steel mills refrained from engaging in the spot market due to lackluster steel demand. After replenishing their iron ore inventories over the past three weeks, Chinese steel producers have opted to hold off on additional purchases, effectively halting a rally that had previously seen spot iron ore prices surge by 24 percent this month following a 31 percent slump in October.

Adding to the subdued sentiment is the release of data indicating that China's factory sector contracted at its fastest rate in 32 months in November, with a significant decline in new orders. This development has contributed to dampened sentiment, resulting in lower steel futures.

On Tuesday, iron ore with a 62 percent iron content experienced a modest decrease of half a percent to $146.60 per tonne. Although there has been some stabilization noted in both spot and futures prices for steel, smaller and medium-sized mills have mostly replenished their stocks of iron ore to satisfactory levels and are satisfied to take a cautious approach for now.

Recent days have seen minimal activity in the spot iron ore market, although traders are closely monitoring a tender by global mining giant BHP Billiton, which is set to conclude later on Wednesday. This tender is anticipated to influence market dynamics moving forward. BHP Billiton is offering Australian Newman and Yandi iron ore fines in the tender.

Reflecting the subdued buying interest, offer prices for imported iron ore in China experienced a decline of $1-$3 per tonne on Wednesday. Australian Pilbara fines saw a decrease of $3, trading within the range of $141-$143 per tonne, including freight costs, while Newman fines also saw a $3 decline, trading between $146-$148 per tonne. Indian 63.5/63-grade fines experienced a decrease of $2, trading within the range of $148-$150 per tonne.

The sluggish demand for steel in China has led mills to scale back their output, with daily production averaging 1.664 million tonnes in the first 10 days of November, marking the lowest output level in a year. The slowdown in Chinese output has also contributed to a decrease in daily global steel production to less than 1.8 million tonnes in October, the lowest level since December 2010.

Given that China's demand for iron ore is heavily dependent on steel demand, it is likely that prices will remain stagnant around current levels, with the possibility of another upturn appearing slim.