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Ore stockpiles in China full, demand slumping

Shanghai: Reports are emerging of capesizes sitting in long queues off China as China's stockpiles of iron ore reaching bursting point. There are some 75 vessels waiting to discharge to the already choked ore terminals.  The president of China's state-owned aluminium giant, Chinalco, has given a dour short-term forecast for commodities markets.

"There is no bottom seen here yet in terms of the economic situation globally,'' Xiong Weiping said in Sydney yesterday. The bleak current outlook for China's iron-ore demand also had to be seen against the backdrop of current price negotiations in which Chinese buyers are expected to win 30% price reductions.

In response to the slowing demand, iron-ore spot prices last week had their biggest drop since October, while iron-ore freight rates slumped 15-20%.

Analysts said the outlook for Chinese growth had changed for the worse in the past two weeks. After a period of steel mill destocking late last year, followed by a period of restocking this year, a truer picture of demand was emerging.

Macquarie Bank analyst Jim Lennon this week reported that 75 iron-ore ships were waiting fully laden at anchor in China, up from 55 at the start of February, and the highest in more than two years.

He said the fact that high port queues, indicating low availability of ships, had not buoyed freight rates was far from encouraging. Analysts said there was little doubt the outlook for China had come off.  [03/03/09]

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