Iron ore prices dropped to the lowest level since September amid a lack of demand inChina, with some mills in the world’s largest buyer ordered to suspend production before a summit of world leaders in Beijing.

“Demand remains weak as Chinese buyers sit on the sidelines, with many Beijing steel mills forced to halt production leading up to the APEC meeting,” Australia & New Zealand Banking Group Ltd. said in a daily report today. Prices dropped yesterday with a lack of bids, the bank said.

The raw material used for steel collapsed into a bear market this year as Rio Tinto Group (RIO), BHP Billiton Ltd. and Vale SA expanded supplies, spurring a global glut just as economic growth in China slowed. Asia’s biggest economy will host the Asia Pacific Economic Cooperation forum in the capital from Nov. 7-12, prompting authorities to order factory shutdowns to try to ensure clean air and blue skies for the event.

“Steel mills in Hebei have been asked to suspend production due to APEC, which affects iron ore demand temporarily,” said Yi Zhu, a Hong Kong-based metals and mining analyst at Bloomberg Intelligence. “The mills will resume producing after the conference.”

Ore with 62 percent content delivered to Qingdao fell 0.8 percent to $78.01 a dry metric ton today, the lowest since Sept. 29, according to data from Metal Bulletin Ltd. Prices dropped in the final two weeks of October, and a retreat to less than $77.97, the low this year that was reached on Sept. 29, would be the lowest since September 2009.

Preventing Smog

The measures in China are aimed at preventing smog from enveloping the city during the gathering, which is scheduled to be attended by U.S. President Barack Obama, Japanese Prime Minister Shinzo Abe and Russian President Vladimir Putin. The provinces of Hebei, the country’s biggest steel-producing region that surrounds the capital, and Shandong, the third-largest, will bear the brunt of the production losses.

Beijing was China’s 29th most-polluted city in the six months through June, according to Greenpeace calculations based on government data. Seven out of the 10 most-polluted cities in China are in Hebei, according to the provincial government.

Some analysts are looking for a rebound in prices. Iron ore may climb to about $90 a ton by the year-end on a seasonal buildup of mills’ holdings, UBS AG analyst Daniel Morgan said by e-mail today. After that, prices will again come under pressure in 2015 on further supply growth from the major miners, he said.

Inventories of iron ore held at ports in China shrank 0.7 percent to 106.3 million tons as of Oct. 31,contracting for a fifth week, according to data from Shanghai Steelhome Information Technology Co. While that’s the lowest level since March, it’s still 23 percent higher this year,

HSBC’s View

Prices will average $80 this quarter, before climbing to an average of $85 through 2015 as higher-cost supplies exit the market, Paul Bloxham, chief Australia economist at HSBC Holdings Plc, said by e-mail today. Chinese output may slump 30 percent to 236 million tons next year, the bank predicts.

Iron ore in Qingdao tracked by Metal Bulletin is 42 percent lower this year. That’s a steeper decline than posted by the Bloomberg Commodities Index (BCOM) of 22 raw materials from gold to crude oil, which dropped 7 percent in 2014.

The global market needs to absorb a surplus of about 110 million tons next year, from 60 million tons in 2014, Goldman Sachs Group Inc. said in an Oct. 23 report. The collapse in prices may deepen as global supply increases and steel-demand growth slows, according to Moody’s Investors Service.

Iron ore shipped to China from Australia’s Port Hedland climbed to 31.7 million tons last month from 29.8 million in September and 25.2 million a year earlier, data showed today. The port handles output from BHP, Fortescue Metals Group Ltd. (FMG), Australia’s third-largest producer, and Atlas Iron Ltd. Total shipments last month were a record 37.5 million tons.

China’s manufacturing slowed further in October as a property slump and slowdown in investment growth put the world’s second-largest economy on course for the slowest full-year growth since 1990. The economy expanded 7.3 percent on-year in the third quarter, the weakest pace in more than five years.�