Iron ore prices sliding to a four-month low

Iron ore prices are continuing to trend below $50 a tonne, leading investors to begin worrying about a prolonged supply glut.

Iron ore bound for the port of Tianjin in China has been trading at $US48.70 a tonne at the end of the latest session, down 0.8 per cent from its prior close of $US49.10 a tonne –the lowest mark since July 11 and the third lowest level in 10 years.

July’s 10-year low of $US44.10 could soon be under threat with iron ore only seeing one positive day in the past 17 sessions, its worst run through an 18-month bear market.

Dire predictions from the Chinese steel sector have been a crucial factor in the recent descent, with traders fearful the expansions from Rio Tinto, BHP Billiton and Vale will occur through a period of stalling and potentially regressing demand.

There’s also more supply set to come online from Gina Rinehart’s giant Roy Hill project, which is expected to deliver its first shipment in December.

Meanwhile, BHP has again warned price pressure will remain in the short- to medium-term, with prices below $US40 possible.

“In medium term, the next few years, it’s going to be much of same; we will continue to see very modest demand growth, and strong supply growth outpacing demand. That pressure will continue to gradually push it (the price) down — because the rate of displacement will get slower,” Alan Chirgwin, BHP’s vice president of marketing for iron ore said. 

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