Iron ore craters again — down 5% in only 24 hours

In Asia, trading was halted after prices sank to the maximum a day allowed by Chinese regulators.

Iron ore prices were in full-scale retreat Thursday to the point that trading was halted in Asia after reaching the maximum loss allowed by Chinese regulators.

Ore with 62% content in Qingdao finally settled 5% lower than Wednesday’s price at $65.20 a tonne, according to the Metal Bulletin, extending this year’s decline to 17%.

Prices for the commodity sank into a bear market in April and are down 17% so far this year.

Earlier in Asia, futures in Dalian dropped 7.3%, the maximum daily decline allowed, while in Singapore, SGX AsiaClear futures lost as much as 9.1% to $60.37 a tonne.

“The iron ore market subsided today giving way to mounting pressure,” Metal Bulletin analysts said in their daily report. “In fact, the MBIOI-62 declined $3.48/tonne to $65.20/tonne after having remained largely stable since the start of the week. Meanwhile similar declines were witnessed across all grade boundaries as prevailing downside risks continue to largely dictate the market’s trajectory.”

Some believe the current drop in prices have its roots in mounting inventory at Chinese ports, though recent reports say they have started to wane.

Others, blame an ongoing glut that has worsened due to that fresh supply coming from recently opened mines, for the weaker prices.

Several forecasters and banks had long warned the rally experienced in 2016 up to the first months of 2017 was not sustainable. Last month, Macquarie added to the gloomy sentiment by predicting that iron ore would continue to decline until finding support at around $50 a tonne, implying that falls of a further 20% were in store.

Iron ore craters again — down 5% in only 24 hoursBMI Research analysts echoed the gloomy predictions by saying they expected prices to continue to slide for at least the next half decade, averaging lower each year to hit to $46 by 2021.

But not everyone is that pessimistic. For some, such as Stan Wholley, president for the Americas at CSA Global, the current downtrend is nothing but an expected correction. “I think people got exuberant about iron ore on the way up and we are seeing a bit of reality check right now,” he recently told MINING.com.

While he doesn’t expect prices to return to the highs hit between 2008 and 2012, he says fundamentals remain sound.

“There will be a focus on higher quality ores over the next few years as new supply comes in, but that is how it should be, and this will mean producers with lower quality ores will feel the pinch as buyers seek a discount,” Wholley warns.