| SINGAPORE, March 11
SINGAPORE, March 11 Chinese steel mills and
traders holding iron ore as collateral for financing are rushing
to sell to repay loans, traders said, piling more pressure on
the steel-making raw material that has lost over a fifth of its
value this year.
Shanghai steel futures dropped for a fourth day to near
record lows on Tuesday, a day after spot iron ore prices fell
the most since 2009 amid mounting signs of an economic slowdown
in top consumer China.
Chinese steel mills and traders were seeking to delay
delivery of iron ore cargoes, traders said.
Major iron ore producers Rio Tinto and BHP
Billiton said they had not seen any
postponement or cancellation of shipments.
"Steel mills and traders are telling BHP and Rio Tinto to
delay their shipment from April to May. The reason is all their
financing is stuck at the port so they can't open new letters of
credit," said an iron ore trader in Singapore.
The shipments involved around 2 million tonnes of iron ore,
the trader said.
About 25-30 percent of iron ore stockpiled at major Chinese
ports is tied to financing deals and owners of those cargoes
were rushing to liquidate them to repay loans to banks, traders
The inventory of imported iron ore at the ports stood at a
record high 105 million tonnes SH-TOT-IRONINV last week,
according to industry consultancy Steelhome.
The increasing use of iron ore for financing had been used
as an explanation for why China had been maintaining its
voracious appetite even as a slowing economy threatens to curb
demand for steel.
BHP Billiton iron ore division head Jimmy Wilson said at an
iron ore conference in Australia that there had been no defaults
on shipments arising from the deterioration in prices.
Andrew Harding, Rio Tinto's head of iron ore, said at the
same conference: "We have not seen any deferrals of shipments."
Iron ore entered bear market territory on Monday after an
8.3 percent drop - the steepest fall since August 2009 - brought
its year-to-date loss to nearly 22 percent.
"Anybody who has a cargo in hand is in panic mode at the
moment," said a trader in Shanghai.
"If they're willing to incur losses, then that means the
market cannot recover any time soon. There will be a lot of
selling in the market which will push the market further down."
(Additional reporting by Jim Regan in Perth; Editing by Ed