Iron ore has finally slipped below the new US$40 per tonne watermark.
This is a worrying new low for the market, as the iron ore futures fell under the US$40 per tonne price point, according to Bloomberg.
The SGX AsiaClear contract price for January slumped to US$39.67 a tonne, and marks a return to prices not seen since before the Global Financial Crisis, in 2007.
The MBIOI-58 Premium Index was even worse, ending the month at US$38.15 per tonne.
Last month independent analyst Andy Xie forecast that the commodity would 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.
This new ‘normal’ comes as the SteelIndex reaches its lowest point since records began nearly a decade ago, after the spot price at the Chinese port of Tinajin fell to just above US$43 a tonne.
The situation is not as dire right across the market, however, with Metal Bulletin recording a spot price of US$42.97 a tonne, which was still a fall overnight.
Conditions are likely to get worse as reports emerge forecasting more than 100 million tonnes of new iron ore supply will hit the market.
According to Fitch ratings, more than 145 million tonnes will be added to current supply levels over the next two years, with Gina Rinehart’s Roy Hill iron ore mine getting closer to export as ships near its port.
These figures from Fitch are an additional 10 per cent on existing levels, and solidifies the likelihood of the iron ore markets lack of recovery in the near term.
“The closure of high-cost iron ore mines has been slower than we previously anticipated, despite the sharp fall in iron ore prices since 2014,” Fitch said in its report.
“Global demand, led by China, has also been weaker than we previously anticipated, and is likely to remain muted through 2016.”