Iron ore prices plunge further as steel prices slide

Iron ore futures in China declined to mark their lowest figures in more than two months on Thursday. This comes amid falling steel prices as concerns arise regarding weaker demand for the product in the country.

Ever since they recorded a high last month, iron ore futures in China have witnessed a downslide of more than 21 percent. In the same period, spot iron ore prices have gone down by 10 percent.

The most-traded iron ore on the Dalian Commodity Exchange fell 1.3 percent to reach 584.50 yuan (AU$111.21) a tonne. This came after it had reached 577 yuan (AU$109.79), the lowest recorded statistic since Jan. 10. On Wednesday, iron ore plunged 16 percent, with further losses witnessed in overnight trading. The most active contract has been pushed to September.

According to ANZ, selling in ore futures was largely influenced by weaker demand. “However, with steel production expected to lift in coming months and disruptions to exports from Australia in recent weeks, we expect this selloff to be relatively limited,” analysts at ANZ said.

Declines were also witnessed by the most-active rebar on the Shanghai Futures Exchange. Down by 0.3 percent to settle at 3,160 yuan (AU$601.25) per tonne, it had grown from a session of 3,118 yuan (AU$593.26).

Increase in Chinese steel prices, clubbed with speculations of stronger construction demand, has been an instrumental factor governing iron ore’s rally this year. When the prices retreated, they also led to a decline in iron ore.

Instead, the focus of the market moved to high inventory in China. Major ports in the country reportedly had 131 million tonnes of iron ore on Friday. As noted by SteelHome consultancy, this was the highest recorded number since at least 2004.

On Wednesday, iron ore for delivery to China’s Qingdao port declined by 3 percent to reach US$84.99 (AU$111.33) a tonne. In comparison, the spot benchmark had reached its maximum in 30 months on Feb. 21, reaching as high as US$94.86 (AU$124.26) a tonne.

The Commonwealth Bank of Australia (CBA) said in a note it expects the prices to continue falling as the year progresses. “We see iron ore prices falling to $60/tonne by year-end as rising seaborne supply offsets a modest lift in iron ore demand,” CBA said.

The news of the decline comes as BGC Contracting acquired a five-year contract for Arrium’s Iron Knob and South Middleback Ranges iron ore projects, near Whyalla, South Australia. Some of the services the company will be offering as part of its new contract, worth in excess of $720 million, include drilling, blasting, hauling, loading, dumping and train load-out.