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Photographer: Andrey Rudakov/Bloomberg Photographer: Andrey Rudakov/Bloomberg

Iron ore sank back below $50 a metric ton on speculation that a global glut will persist as China’s leading mills group said local steel demand was contracting at an unprecedented pace and supplies from the biggest miners were expected to climb.

Ore with 62 percent content delivered to Qingdao fell 3 percent to $49.95 a dry ton on Wednesday, the lowest price since July 9, according to Metal Bulletin Ltd. The decline snapped the trading range that’s held since July 10 of prices between $50 and $60. Iron ore last traded below $50 on July 9 and bottomed for the year at $44.59 one day earlier on July 8.

Iron ore’s renewed losses show that the market has yet to reach a balance as the world’s biggest miners boost low-cost output while steel consumption shrinks in China. Demand for steel in the second-largest economy is contracting even faster than mills are cutting output, swelling a steel glut, the deputy head of the China Iron & Steel Association said on Wednesday. Moody’s Investors Service forecast lower iron ore prices next year.

‘Pressures Prices’

“More supply coming into the market obviously pressures prices,” Carol Cowan, Moody’s senior vice president in New York, said in a phone interview on Tuesday, referring to iron ore from Brazil’s Vale SA and Rio Tinto Group in Australia. “We basically see Chinese steel production growth if not flat, down on-year again in 2016.”

Iron ore will average $45 next year and in 2017, Cowan estimated. The seaborne glut may increase next year as mine supplies surge further and Gina Rinehart’s Roy Hill project in Australia begins shipments, she said.

China’s steelmakers, which produce half of global steel output, are battling oversupply and sinking prices as consumption shrinks for the first time in a generation. Steel rebar futures in Shanghai sank to a record on Wednesday.

The country’s steel demand evaporated at unprecedented speed as economic growth slowed, Zhu Jimin, deputy head of the China Iron & Steel Association, said at a quarterly briefing in Beijing. Mills faced tighter credit and rising losses, he said.

(Adds low price for this year in second paragraph.)