Iron ore reaches record low

Iron ore has reached its lowest point since SteelIndex began keeping records.

The Chinese port of Tianjin saw a slip overnight, with the spot price falling 1.8 per cent to $43.40 per tonne, the lowest SteelIndex point since November 2008.

Oncoming and increasing supply from the Pilbara has helped precipitate this drop.

Just yesterday iron ore bears were predicting the metal’s downward spiral to continue below US$40 per tonne.

Independent analyst Andy Xie believes the commodity will slip below US$40 per tonne, and will trade just above US$30 per tonne next year,  The former Asia-Pacific head economist at Morgan Stanley previously pointed to the steel industry reaching a crisis point, adding they needed to cut production to drive demand.

Xie had also forecast the US$40 lows reached earlier this week, when the price was still in the US$60 sphere.

Goldman Sachs has also predicted continuing weakness for iron ore over the next two years, in line with its current decline.

"We expect prices to decline… to $44/dmt [CFR China] next year and $40/dmt in 2017," Goldman analysts said in a note last week.

"We have been forecasting weak commodity returns since last fall, although the extent of this weakness has far exceeded our initial expectations.”

It pointed to ongoing oversupply, and expects “divergence between production capacity and demand to continue".

New Macquarie Bank analysis is forecasting continued pained from Chinese steel mills as they attempt to curb losses and mitigate lower steel prices.

 

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