Iron ore has fallen again off the back of continued depression in China, strengthening bearish sentiment of the metal.
On Friday the price slid closer to the watermark, falling to US$50.90 per tonne, the lowest level in three months and down nearly 10 per cent in two weeks.
It came as the People’s Bank of China cut interest rates down to 4.35 per cent and the major miners continue to up production rates, with Gina Rinehart’s Roy Hill forecasting shipping to commence soon, adding to the oversupplied market.
Despite this fall, the price is yet to drop to the year’s low point of US$44.59, reached on July 8.
Many in the market are expecting the metal to fall even lower.
Last week vice president for Citigroup’s China commodities research group, Ivan Szpakowski, pointed to a new recent low for the metal of US$40 per tonne next year.
According to Szpakowski, the slowdown in Chinese demand coupled with oncoming oversupply thanks to record production rates from Vale and BHP is likely to drive down the price below US$50 per tonne by the end of this year, and to US$40 per tonne or lower by the end of the March quarter next year.
It comes on the back of the World Steel Association Short Range Outlook (SRO) for 2015 and 2016, which forecast that global steel demand will decrease by -1.7% to 1,513 Mt in 2015 following growth of 0.7% in 2014, and in 2016, it is forecast that world steel demand will show growth of 0.7% and will reach 1,523 Mt.
Hans Jürgen Kerkhoff, Chairman of the World Steel Economics Committee explained, “It is clear that the steel industry has, for the time being, reached the end of a major growth cycle which was based on the rapid economic development of China.”
“The steel industry is now experiencing low-growth which will last for the time it takes for other developing regions of sufficient size and strength to produce another major growth cycle,” he said,
“We expect the current headwinds to moderate in 2016 but this is based on a belief that the Chinese economy will stabilise.”