Hunan Gold shares surge after large deposit found in China
The Geological Bureau of Hunan Province said on Thursday that it had detected more than 40 gold veins containing an estimated 300 tons of the precious metal.
Iron ore prices fell again on Wednesday as the outlook for steel demand in China – responsible for consuming 60% of the world’s iron – continues to darken.
The benchmark import price of 62% iron ore fines at China’s Tianjin port dropped 3.5% to $118.60 a tonne, down 12% since the start of July and more than 32% weaker than this time last year. Tianjin ore averaged a record $168 during 2011.
Chinese import prices are now the lowest since October 2011 according to data provided by Steelindex. During that month ore shed over $60 a tonne from record highs above $180 a tonne to briefly touch $116 a tonne. Iron ore first traded above $120 a tonne in January 2010.
Reuters reports small Chinese traders are being forced to sell off loss-making stockpiles “as they give up hope for a market rebound anytime soon”:
“The capitulation by small traders is important because China’s iron ore market is fragmented and thousands of small scale dealers play a significant role in price setting.
“They reflect spot market sentiment more accurately than big state owned firms, which have more diversified businesses and are normally locked into long-term contracts.”
The Financial Times (sub required) quotes a research note from Nomura steel analysts Matthew Cross:
Chinese rebar prices are now 8% lower than October 2011 lows, while iron ore prices remain 5% higher. […]
Iron ore prices have already reached US$120/t “floor prices” but the destock may have just begun. Iron ore prices fell roughly 35% during both previous destocks, from US$180/t to around US$120/t, a similar decline from 2012 iron ore price highs of US$150/t suggests potential downside to around US$100/t
Cross has a chart that points out that the last time Chinese rebar was priced at this level iron ore was trading at around $70 a tonne.
Chinese mills have been producing at record pace of 2 million tonnes per day since April despite a steep drop-off in demand as the country’s building boom begins to look more and more unsustainable.
The Chinese economy – the second largest in the world – grew 7.6% in the first half of this year. That was the slowest pace since early 2009 at the peak of the global financial crisis.
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