Iron ore price makes a slight gain

The price of iron ore has made a slight recovery and is now trading back up past $US47 a tonne.

Benchmark iron ore for immediate delivery to the Port of Tianjin in China was last trading at $US47.60 a tonne, a 1.9 per cent rise.

The price spike ended a losing streak which has seen more than 10 per cent wiped from the value of the commodity in just two weeks.

However the upswing is not enough to help junior miners meet their breakeven costs and yesterday Atlas Iron suspended trading pending a full business review.

UBS estimates that Atlas is losing $US15 for each tonne of ore it mines at current spot prices.

Atlas said the extent and pace of the decline in the price of iron ore had led to the review which will include its financial outlook, asset sale opportunities and capital structure.

It is also thought other iron ore miners including BC Iron, Mt Gibson and even Fortescue Metals Group are all loss-making with the price of iron ore this low.

All three companies lost ground on the ASX yesterday and are trading at their lowest level since the GFC.

Several banks including Deutsche Bank say iron ore will continue to track downwards and reach a floor of $US45 a tonne.

The prediction comes as steel demand in China dropped 5 per cent in the past six months, its biggest fall since the GFC.

This has happened at the same time the major miners BHP Billiton, Rio Tinto and Vale continue to push out mega tonnages as the billions of dollars they invested in mine expansions over the last few years comes into production.

Analysts predict it is this new supply which will see seaborne iron ore supply exceed demand by 55 million tonnes this year, rising to 184 million tonnes in 2018.

BHP and Rio have stated that by 2030 China will be producing one billion tonnes of steel.

However others say this figure is grossly overstated.

Economist Ross Garnaut says steel production in China will drop to 600 million tonnes by 2030.

This estimation was backed by comments by president of the China Metallurgical Industry Planning and Research Institute Li Xinchuang recently who said annual steel production in the country had peaked at 823 million tonnes last year and would fall to 567 million tonnes by 2030.

BHP’s former iron boss Ian Ashby says now that the wall of new supply has hit, its impact on China is being fully realised.

“My concern would be that I don't think the slowdown in China has been fully analysed with respect to what it means for steel demand and I also think that there is going to have to be some 'fessing up soon by certain companies that the demand they've projected into the future is not going to materialise," Ashby said.

To keep up to date with Australian Mining, subscribe to our free email newsletters delivered straight to your inbox. Click here.