Iron ore price tumbles to fresh 5.5-year low
Iron ore has tumbled to a fresh five-and-a-half-year low as a sharp decline in steel prices and softening demand from China, the world’s largest consumer, weigh on prices of the steelmaking material.
The price of ore with 62 per cent iron content fell by 3.9 per cent Monday to $US63.30 a metric ton at China’s Tianjin Port, according to data provider The Steel Index. That’s its lowest level since May 2009.
Prices of the bulk commodity halved last year as big Australian miners such as BHP Billiton PLC and Rio Tinto PLC pumped additional supplies into the seaborne market, although robust demand from China’s steelmakers provided a degree of support to iron ore.
But that source of demand is now looking shaky, meaning iron-ore prices have continued to fall this year.
Ample supplies of Chinese steel have caused the alloy’s price to slump by 8 per cent in the past two weeks, nearly catching up to the 14 per cent decline in Chinese steel prices recorded during the whole of 2014. Expectations of slowing demand ahead of the Lunar New Year holiday in mid-February have also knocked iron-ore prices, analysts say.
“With the recent collapse in steel prices, many Chinese steel mills are now not profiting from producing steel — they were in 2014,” Jeffrey Landsberg, managing director of US-based Commodore Research & Consultancy, said.
“Many people don’t realize that Chinese steel prices were rather resilient last year, but that prices are now collapsing.”
One problem for Chinese steelmakers is that they can’t easily export their excess supply. Last year, China gradually stepped up its steel exports as domestic demand dropped, mainly to countries across Asia such as South Korea, Vietnam and the Philippines.
After exporting a record 10.2 million tons in December, demand for China’s steel appears to be waning, analysts say, with demand from Asian countries unable to keep pace with China’s rising supplies at a time when many are facing moderating growth.
A 6 per cent fall in Dalian iron-ore futures in the past week preceded the large overnight fall in the benchmark physical iron-ore price, according to a report from Australia & New Zealand Banking Group Ltd. Chinese steel mills are starting plant shutdowns for maintenance earlier than normal ahead of the Lunar New Year, which starts February 19, it said.
Rising supply from Australia, the world’s largest exporter of iron ore, is still adding to the glut of the raw material. A report by Capital Economics said Australia’s iron-ore output is expected to grow by 6 per cent year-to-year this year.
“The combination of a further increase in global iron-ore supply this year and only subdued demand growth suggests iron-ore prices will continue to drift lower,” the report said.
Source: the australian – Iron ore price tumbles to fresh 5.5-year low
