China Steel glut may take nine months to clear, pressuring Iron Ore: ANZ

PERTH (Scrap Monster): A Chinese steel inventory overhang that has cut spot demand for iron ore and forced prices to their lowest levels since November 2009 may take as long as nine months to unwind, leaving it up to iron ore producers to cut output to shore up prices, said the Australia and New Zealand Bank in a commodity research note.

According to the bank, unwinding of excess steel supply may take six to nine months to complete and a drop in China steel prices points to slower demand from heavy industry and continued production by loss-making steel capacity.

"This will continue to weigh on [iron ore] prices until at least October, and potentially beyond. In our view, iron ore prices below $100/dmt [CFR China] look oversold, with close to 50% of Chinese iron ore supply losing money. But we are unlikely to see the market bounce back until mine supply starts to wind down in the coming months," ANZ concluded.