Iron ore sinks with steel on swelling inventories; miners tumble

[SINGAPORE] Iron ore and steel in Asia extended losses as swelling inventories revived concerns that supply gluts could worsen and as a trading frenzy in China begins to unwind. Miners' shares tumbled in Sydney.

The SGX AsiaClear iron ore contract for June settlement sank as much as 1.8 per cent to US$50.09 a metric ton in Singapore, while futures on China's Dalian Commodity Exchange fell as much as 2.1 per cent. The most-active steel reinforcement bar contract slumped 4 per cent to 2,089 yuan on the Shanghai Futures Exchange.

Steel and iron ore have advanced in 2016, countering expectations for further losses on weakening demand in China amid oversupply. Prices are retreating after Chinese authorities introduced trading curbs to deter excessive speculation. Stockpiles of iron ore at China's ports expanded to almost 100 million tons, and rebar inventories climbed for the first time in nine weeks.

"A marked increase in steel inventories has weighed on the market, while the wait-and-see attitude among downstream users is still strong," said Zhou Bo, an analyst at Everbright Futures Co. "Weakened sentiment in the steel industry has greatly suppressed iron ore."

Stockpiles of iron ore held at ports across China increased 1.4 per cent to 99.85 million tons last week to the highest since March 2015, according to data from Shanghai Steelhome Information Technology Co. Rebar inventories rose 1.1 per cent to 4.22 million tons, Steelhome data showed.

Miners' shares slumped in Sydney. BHP Billiton Ltd, the world's largest mining company, fell as much as 5.3 per cent, while Rio Tinto Group declined 5 per cent. Fortescue Metals Group Ltd. lost as much as 7.6 per cent. The trio are Australia's largest iron ore producers.

BLOOMBERG