Iron ore tumbles yet again to reach lowest since January

Iron ore (6) — A geologist refines an iron ore core sample before cataloguing it at an Atlas Iron Limited's prospective iron ore mine site near Port Hedland, about 1,600km (960 miles) north of Perth, May 26, 2008. Reuters/Tim Wimborne

Iron ore spot markets suffered a downslide on Monday, pulling the benchmark level below US$80 (AU$105.15) a dry tonne. It the first time since early January that such a low number has been recorded.

As China approached the Tomb-Sweeping Festival, slowness in trade was seen. As noted by Metal Bulletin, the spot price for benchmark 62 percent fines declined by a margin of 1.28 percent to settle at US$79.36 (AU$104.31) a dry tonne.

Since Feb. 21, when the prices surged to a multi-year high of US$94.86 (AU$124.68) a tonne, the overall drop has been extended to 16.3 percent. The year-to-date increase has also suffered, standing at a mere 0.6 percent. In contrast, over a month ago, the same number was more than 20 percent.

Last month, vessel-tracking and port data compiled by Thomson Reuters Supply Chain and Commodity Forecasts revealed that China imported as many as 90.3 million tonnes of iron ore. Matching the estimate by official customs numbers, this is the fifth time – after January 2017, November 2016, September 2016 and December 2015 – that the imports of iron ore have gone past the 90 million tonne mark. This year’s iron ore imports have been robust, which can largely be attributed to high steel prices.

As compared to benchmark spot market, prices for lower and higher grade ores were more or less static due to weaker market participation. Trade will be slower as Chinese markets will be closed for the Tomb Sweeping Festival. Market participants are expected to return on Wednesday.

The increasing volume of iron ore inventories at Chinese ports has largely been responsible to the lack of sustenance in price gains. According to industry consultants SteelHome, inventory stockpiles at 46 Chinese ports have touched 132.5 million tonnes in the week to March 31.

In October 2015, after which the increase in prices was witnessed, inventories at Chinese ports were recorded to be 80.5 million tonnes. According to China Metallurgical Industry Planning and Research Institute, the Chinese steel demand is forecast to come down to 660 million tonnes this year. This will be a decline of 1.9 percent from last year.

"We think China's steel consumption will decrease step by step by step - maybe increase some years, like last year. That's our situation," Li Xinchuang, the institute's president, said.

At the same time, China's steel exports declined by 25.7 percent – standing at 13.17 million tonnes – in the first two months of this year. If the trend is to continue the rest of the year, exports can further slip to around 80 million tonnes, a fall from 108.5 million tonnes recorded last year.