Chinese pressure on iron ore

Iron ore prices fell to their lowest level in four months due to the demand outlook in China. Iron ore, which fell as much as 9 percent last week, fell to its lowest level since October as hopes for a recovery in Chinese steel demand after the holidays faded. Iron ore fell more than 3 percent to below $116 a ton at the beginning of the week. This was seen as a worrying sign given that March and April, when construction is intense in China, are fast approaching. The announcement by Vale SA, the world’s second-largest iron ore producer, that it was trying to increase its sales outside China was seen as an indication that miners were not optimistic about a recovery. Steel production was weak and China had not fully recovered from the holiday, Minmetals Futures Co. said in a note. It said factories may base their production on sales volumes due to low profitability. According to data from the China Iron and Steel Association, inventories at China’s leading steelmakers rose by 25.7 percent in mid-February compared with the beginning of the month. Daily crude steel production has risen modestly recently. Iron ore prices rose in the second half of last year on hopes that China’s stimulus measures would boost economic activity. But local governments in China have so far appeared unwilling or unable to borrow more, fueling expectations that Beijing could fill the gap and borrow more.