Iron ore has begun stabilising after a series of falls, with a stronger price point likely to see more marginal players re-enter the market.
The metal’s Northern China benchmark iron ore price sat at US$55.70 per tonne, a fall from its recent heights – when it broached the US$70 per tonne mark – of the last 16 months, however it is a slight increase from the US$54.20 per tonne price point experienced earlier this month.
This increased stability in the metal, and a move from the consistent volatility seen late last year, is encouraging more marginal producers to restart production, potentially damaging gains made to date.
Earlier this year, UBS forewarned of this issue, telling Australian Mining that a strengthening iron ore price could act as a catalyst for smaller operators to restart their operations, adding more tonnages and distorting the market without additional demand to support these increased output levels.
Iron ore major Vale is also warning of additional, unneeded tonnages, entering the market.
Speaking at an industry conference last week, Vale’s global director of iron marketing and sales – Claudio Alves – forecast additional tonnages from marginal players due to the more favourable price point.
Rio Tinto and BHP have also highlighted the increasing potential of the market once more becoming oversupplied, an almost unavoidable outcome as Roy Hill ramps up to its full production rates and Vale brings on its S11D mine.