Port Hedland in the iron ore-rich Pilbara region of Western Australia.
Shares in Australia’s top iron ore miners tumbled on Friday, after the price of the steel making material hit the lowest in about four months, as fresh reports provided further evidence of a slowing Chinese economic and consequently increasing stock piles up at its ports.
Iron ore for immediate delivery to China stood at $55.26 a tonne, its weakest since March, data from the Metal Bulletin Iron Ore Index showed.
Shares in top Australian producer Rio Tinto (ASX:RIO) closed down 1% to A$52.5 in Sydney and was trading 1.2% lower in London mid-afternoon, while No.2 iron ore miner BHP Billiton (ASX:BHP) finished the session down 1.52% to A$26.59. Fortescue Metals (ASX:FMG), a distant third, was the most affected, closing down almost 5% to A$1.82 in Sydney.
Beijing used to import more than a billion tonnes of iron ore a year to make steel, but the numbers are quickly dropping.
“It’s clear that China can no longer consume all the iron ore that’s out there, so something’s got to give,” said James Wilson, a sector analyst for Morgans Financial in Perth according to Reuters.
Prices suffered its biggest one-day percentage in more than a year Thursday, hitting a four month low on a pickup in mid-grade transaction volumes. This drop, Metal Bulletin analysts say, has knock the rest of the market down, with the MBIOI-58 Premium Index dropping to recent lows calculating at $51.20 per tonne, slightly more than $4 per tonne below the MBIOI-62.
Shipments from Australia and also Brazil, another major supplier, have started to increase as the weather improved. They hit 25m tonnes last week and are expected to reach the same level this week.
Nothing new under the sun
Analysts have been warning for quite some time now that the recovery in prices from a six-year low of less than $47 a tonne in April to $65 last month was going to be short-lived.
Citi had forecast iron ore to fall to $48 a tonne in the third quarter and $US38 in the fourth quarter.
Capital Economics said iron ore could fall into the $30s in the second half of 2015, ending the year at $45.
Goldman Sachs Group said last month that the spot iron ore price would again fall below $50 a tonne over the medium term, in line with the current marginal cost of production in Australia and fellow iron ore heavyweight Brazil.
Australia & New Zealand Banking Group predicted the price would fall to $53 over the next three months and stay under $60 a tonne in 2016.
Source: MB Iron Ore Index.
