Rpt-Iron ore hits lowest in nearly 3 yrs; Rio Tinto shares plunge

Thu Aug 30, 2012 6:48am EDT

* Rio Tinto shares at 3-year low, BHP falls most in a month
    * Global iron ore demand may drop in H2 vs H1 -Baosteel
    * China steelmakers to suffer bigger loss in Aug -CISA
    * Shanghai steel rebar slips for 14th day in a row

    By Manolo Serapio Jr
    SINGAPORE, Aug 30 (Reuters) - Iron ore prices have fallen to their lowest
since 2009, sending shares of miner Rio Tinto to three-year troughs as
a slowdown in top consumer China threatened to further sap demand, putting the
fortunes of miners at risk.    
    The price of the steel-making raw material has dropped by a third, or more
than $45 per tonne since July as Chinese steel producers shunned cargoes amid
declining demand. Prices could fall up to 30 percent more with no sign
consumption will rebound anytime soon, analysts and traders said.
    Benchmark iron ore with 62 percent iron content slid nearly 5
percent to $90.30 per tonne on Wednesday, the lowest since November 2009,
according to data provider Steel Index.
    "It's possible for prices to fall to as low as $65 to $70 in the spot
market, before a recovery back to the $80 to $90 range," said Fairfax I.S.
analyst John Meyer, adding that the price slide could continue for the next one
to two months.
    "It's a little early to look for significant restocking in China. I think
they're still shaking the tree."
    
    
     
    CHINA SLOWDOWN PUTS ON BRAKES
    Iron ore is the biggest revenue earner for top miners Vale, Rio
Tinto and BHP Billiton  and producers have for years
banked on China's industrialisation efforts to sustain its appetite for the
steelmaking ingredient.
    But the slowdown in the Chinese economy put the brakes on a rally that
lifted spot rates to near $200 last year, more than triple the level since 2008.
Prices have been falling rapidly since early July.
    Shares of Rio Tinto in Australia fell 3.8 percent to close at A$48.63, their
lowest since July 2009, while rival BHP lost 2.4 percent, the steepest
single-day drop in a month.
    In London, BHP shares fell nearly 2 percent by 1003 GMT, the biggest drop in
two weeks. Rio shares were down 1.8 percent, falling for a sixth day running.
    
    STRUGGLING
    Global demand for iron ore could drop in the second half of 2012 compared
with the first six months, said Baoshan Iron and Steel Co Ltd,
China's biggest listed steelmaker.
    The world's supply of iron ore would also rise by more than 50 million
tonnes in the second half from the first, Baosteel said, weighing further on
prices that have already dropped by almost $60 from this year's peak reached in
April. 
    Fading steel demand in China will see producers incurring bigger losses this
month following a loss of 1.9 billion yuan ($299 million) in July.
 
    "If the steel sector keeps suffering, the iron ore sector will not see any
rebound," said Henry Liu, head of commodity research at Mirae Asset Securities.
    The most active rebar contract for January delivery on the Shanghai Futures
Exchange slipped 0.2 percent to close at 3,437 yuan a tonne, stretching
its losing streak to a 14th day running.
    Rebar, or reinforcing steel bar which is used in construction, hit a record
low of 3,327 yuan on Wednesday. Down almost 9 percent so far in August, it is on
track to extend its monthly loss to a fifth straight month.
    The price of iron ore has fallen by nearly 23 percent this month as most
Chinese buyers opted to keep their iron ore inventories low and bought smaller
lots from port stockpiles instead of ordering fresh cargoes.
    "We're lucky we don't have so much cargo. Many traders are struggling to
unload their material into the market," said an iron ore trader in Shanghai.
    Price offers for cargoes from Australia, Brazil and India fell by another
$2-$4 a tonne on Thursday, traders said. 
        
  Shanghai rebar futures and iron ore indexes at 1003 GMT
                                                                    
  Contract                          Last    Change   Pct Change
  SHFE REBAR JAN3                   3437     -6.00        -0.17
  PLATTS 62 PCT INDEX               92.5     -3.00        -3.14
  THE STEEL INDEX 62 PCT INDEX      90.3     -4.50        -4.75
  METAL BULLETIN INDEX             90.09     -6.70        -6.92
                                                                    
  Rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day