Large drop for iron ore prices

Iron ore prices posted their biggest daily drop in 14 months yesterday, proving that while demand remains high the market is volatile.

According to the Steel Index the benchmark price for iron ore fell $US7.50 a tonne on Wednesday to $US145.40, the biggest daily drop since November 2011.

The 4.9 per cent drop marks the end of a recent rally in prices, which saw the value of iron ore rise 40 per cent on the lows experienced late last year.

One London-based iron ore trader told Reuters the drop had been expected, but underlying demand was still strong and Chinese buyers were expected to be back on the market next week.

“We saw that coming. After the big price increase last month, people thought prices were not sustainable anymore and since two to three days ago we have started to see Chinese customers in a waiting mode,” they said.

“I expect physical prices coming off a bit more, down to $US140, but not much lower because not everyone is sitting on massive [stockpiles].”

Last week analysts said the recent surge in iron ore prices was good news for the mining industry, and would see the sector find renewed investment in 2013.

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