Save
Print[Ferro-alloys.com]Iron ore prices have fallen to their lowest in five months amid a wave of negativity that has led Chinese traders and steel mills to sell down their stocks of the key steel ingredient.
The price of benchmark Australian iron ore with 62 per cent iron content has fallen 12.5 per cent in the past month. On Monday, it dropped to $123 a tonne, the lowest since December, according to The Steel Index, a price reporting agency owned by Platts.
The price of iron ore is crucial to the global economy since it feeds through into the cost of steel and, ultimately, to the cost of everything from houses to washing machines.
It is also critical to the profitability of miners BHP Billiton, Rio Tinto and Vale, as well as steelmakers such as ThyssenKrupp, ArcelorMittal and Posco.
The fall in prices will weigh on the profitability of the mining industry, since iron ore has been one of the mined commodities to have outperformed expectations in recent months.
The steelmaking ingredient rose to a 16-month high of $158.90 a tonne in February, having surged more than 80 per cent in a few months. Even at this week’s price of $123, margins for mining iron ore remain extremely high for the largest producers in Australia and Brazil, whose costs of production are closer to $50.
Analysts said that the past week’s tumble in prices had been caused by an outbreak of bearish sentiment in the Chinese steel industry, which accounts for 60 per cent of global seaborne iron ore imports. In particular, large Chinese steel mills had been selling their inventories on the market, they said.
“Chinese mills appear to be undertaking yet another iron ore destock, resulting in the usual price weakness,” said Graeme Train, analyst at Macquarie in Shanghai. “In our view, prices will continue to fall over the coming weeks until destocking is complete.”
Melinda Moore, analyst at Standard Bank in London, said that prices had fallen below the cost of production for the highest-cost producers in China and India, suggesting the market could soon find a floor.
“Current supply-demand balances remain tight and last week’s price weakness was driven by destocking pressures, rather than underlying fundamentals,” she said.
Mr Train predicted that a return to the market by Chinese mills could support the market in the second half of the year just as many participants expect a drop in prices as a result of a predicted increase in supplies.
Copyright © 2013 Ferro-Alloys.Com. All Rights Reserved. Without permission, any unit and individual shall not copy or reprint!
- [Editor:editor]
Daily News
Research
Magazine
Company Database
Customized Database
Conferences
Advertisement
Trade
Online inquiry
Contact
Tell Us What You Think