The spot price of iron ore now has fallen one-third from its February peak, as the slide into a bear market turns into an accelerating rout.
At its Tuesday fix, ore with 62 per cent iron content slid $US3.05, or 4.6 per cent, to $US63.20 a tonne, according to Metal Bulletin. The price has tumbled more than 20 per cent so far this month. It had fallen 3.5 per cent on Monday.
At its Tuesday fix, iron ore slid $US3.05, or 4.6 per cent, to $US63.20 a tonne, according to Metal Bulletin. The price has tumbled more than 20 per cent so far this month. Photo: Brendon Thorne
Sellers are keen to sell and buyers, anticipating further price drops, are reluctant to buy, contributing in part to the volatility. Steel mills in China are still in the midst of tapping their substantial iron ore stockpiles, which means they are unlikely to rush to buy any seaborne cargoes, market sources told Metal Bulletin.
A mill in east China is keeping its iron ore inventory at levels enough for just under a month’s production, an inside source said. A number of small mills in Shandong province are maintaining just 6-7 days’ worth of stock, he added.
Shares in the world’s biggest miners were being dragged lower too. In London overnight, BHP Billiton fell 5.6 per cent, pacing the FTSE 100 down 2.5 per cent. Rio Tinto fell 3.8 per cent. Glencore and Anglo American also tumbled. In afternoon trade in New York, BHP was down 2 per cent and Rio 1 per cent lower. The US-listed shares of Vale slid 3.1 per cent.
The price retreat has been punctuated by a series of sharp drops and the spot price now is nearing the level which many analysts and industry executives have tipped as more appropriate given the outlook for rising global supplies of the steel-making raw material. Separately, there’s mixed signals on steel output and demand for steel within China.
In recent weeks steel futures in China have endured a sustained price drop too amid worries that supply was rising as the government seeks to rein in property development.
On Tuesday, Shanghai rebar slipped to 10-week lows as output in the world’s top steel producing country showed no signs of abating despite tepid demand and government efforts to cut capacity.
The most-active rebar on the Shanghai Futures Exchange fell 3.7 percent to end at 2,824 yuan per tonne, after earlier hitting a session low of 2815 yuan, a level last seen on February 7.
“Oversupply concerns in China’s steel market curbed demand” for raw material iron ore, Commonwealth Bank of Australia analyst Vivek Dhar said in a note.
China’s crude steel output reached a record 72 million tonnes in March as mills ramped up output in anticipation of a pickup in demand that has remained slow, government data released on Monday showed.
A more than doubling in premium coking coal prices since Cyclone Debbie hit top producer Australia last month has also squeezed margins of Chinese steel mills, further reducing their appetite to purchase iron ore, wrote Dhar.
“In any case, steel market-related weakness will continue to push iron ore demand lower,” he said, adding that iron ore supply is also rising, including from marginal exporters that responded to the early-year rally in prices. The bank has forecast iron ore to drop to $US60 by the December quarter.
The sudden drop in the price of iron ore may prove a budgetary challenge for the Turnbull government.