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Will Iron ore to slump towards year end?

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Will Iron ore to slump towards year end?

Iron ore has steadily rebuilt on price over the last two weeks, in the wake of an 8 per cent drop that left miners quaking in their steel-capped boots.

Steel Index data showed that 62 per cent fines finished the week at Tianjin port at $110.70 per tonne.

This price is still down 17.5 per cent on the start of the year, and despite the recent recovery, independent research house Capital Economics senior commodities economist Caroline Bain has predicted the price will drop to $95 by the end of the year, and $85 the following year.

Last year iron ore averaged $135 per tonne, thanks to record breaking imports in China with mills restocking.

Iron ore continues to be highly exposed to the Chinese market, which accounts for 75 per cent of global usage, 62 per cent of global trade, and 48 per cent of global steel production.

Capital Economics analysts said that the slump in price “begs the question of why the mining companies have maintained their commitment to higher production”, which was answered by’s Frik Els, who said that the larger producers such as Vale, Rio Tinto and BHP are producing for $40-50 per tonne, prices with which smaller producers in China will not be able to compete, leaving them pushed out of the market.

They also said that with Australian producers Rio Tinto, Fortescue and BHP ramping up production to an additional $170 million tonnes this year, massive surplus and further price drops are inevitable.


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