April 2, 2015 / 3:53 AM / 4 years ago

Chinese iron ore futures test new lows on glut concerns

* Iron ore and rebar futures touch new record lows
    * Few signs for substantial pick-up in steel demand
    * Iron ore plunge stokes pressure for Australia rate cut
    * Spot iron ore drops below $50/T

    SHANGHAI, April 2 (Reuters) - Chinese iron ore futures fell
for a seventh session on Thursday to hit a fresh contract low
amid persistent worries over growing supplies and subdued steel
demand in China, the world's top consumer of both the
commodities.
    An economic slowdown, chronic overcapacity and a state vow
to tackle pollution have combined to force China's steel mills
to curb production and buy less iron ore.
    As a result, inventories of the steelmaking raw material
have piled up at China's ports, which together with continued
low-cost expansion by global miners have driven down spot iron
ore prices to a multi-year low under $50 a tonne this week.
    Benchmark 62 percent grade iron ore for immediate delivery
to China .IO62-CNI=SI plunged 3.9 percent to $49 a tonne on
Wednesday, the lowest since the Steel Index began compiling
prices in late 2008.
    September iron ore contract on the Dalian Commodity Exchange
 was at 381 yuan ($61) a tonne by midday break, the
weakest since the launch of the contract in 2013. 
    The drop reflects "persistent surplus concerns as BHP
Billiton, Rio Tinto and Vale look to expand supply as China's
demand weakens", CBA said in a research note on Thursday.
"Falling costs have also helped push iron ore prices lower." 
    The plunge in iron ore prices has eroded mining profits and
government tax revenue for Australia, which is expected to cut
interest rates as soon as next week. 
    Tepid steel demand amid a property downturn in China and
falling costs of iron ore dragged on rebar prices.
    The most-traded October rebar contract on the Shanghai
Futures Exchange fell for a third session on Thursday,
down 1.8 percent to 2,363 yuan by 0311 GMT. It hit a low 2,352
yuan, the lowest since the launch of the contract in 2009.
    "We had expected steel demand to improve from end March, but
the long-awaited peak season didn't come," said Hu Xiaodong, an
analyst at Nanhua Futures in Hangzhou.    
   
  Rebar and iron ore prices at 0343 GMT                              
                                                                     
  Contract                          Last    Change   Pct Change
  SHFE REBAR OCT5                   2363    -43.00        -1.79
  DALIAN IRON ORE DCE DCIO SEP5      381    -14.00        -3.54
  THE STEEL INDEX 62 PCT INDEX        49     -2.00        -3.92
  METAL BULLETIN INDEX             49.53     -1.82        -3.54
                                                                     
                                                                     
  Dalian iron ore and Shanghai rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.1969 Chinese yuan renminbi)

 (Reporting by Ruby Lian, David Stanway and Shanghai Newsroom;
Editing by Himani Sarkar)
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