Iron ore is continuing its slow decline, as major miners become more bearish on the metal.
Iron ore has fallen below US$40 per tonne on the SteelIndex to US$39.40 per tonne, the lowest ever level for the commodity assessor.
However spot prices at Chinese ports managed to hover just above the new normal, at US$40.03 per tonne – a 10 per cent decline in the space of a week.
The metal has been on a constant downwards movement for the last five months, with prices trading at 2007 lows, and the major miners are not optimistic on its long term stability.
"The first thing I would say is we're relatively bearish about the long term projections for prices," Chief Executive Andrew Mackenzie stated, according to Reuters
BHP’s iron ore head Jimmy Wilson concurred, adding that margins will improve however once miners become more efficient.
On the iron ore price today, we all know we have said for a long period of time that the cost curve will flatten and prices will go up and down," he said, according to Farifax.
Vale is also negative on long term movements, having announced cuts to its production levels next year in an attempt to stem the decline.
The miner cut back its forecast for next year to address ongoing volatility in the market, oversupply and low margins, and as a reaction to the Samarco mine spill,
Analysts are also forecasting a continued weak market, with the potential for the price to slip to US$30 per tonne.
However Rio Tinto and BHP are still going ahead with their planned increase, and are nearing their targets of 360 million tonnes and 290 million tonnes of iron ore respectively.
The seemingly constantly delayed first shipments from Roy Hill are also slated to bring additional supply online, increasing tonnages in an already flooded market and potentially driving the price down further.
Yet despite this price contraction, Rio Tinto is still positive on iron ore, stating on Friday the shrinking to a new long term average should not be a surprise for the market.
"The myth is iron ore has fallen off a cliff," Rio Tinto’s iron ore chief Andrew Harding said, according to Fairfax.
"Nothing could be further from the truth. In reality what we have seen is instead of a cliff, which is a plateau of permanently high prices which suddenly disappeared … we actually climbed a hill slowly and we have run down the other side in recent years."
However even with these lower prices, BHP and Rio’s iron ore operation will remain profitable, with their cost of production hovering between $15 and $20 per tonne.