Iron ore drops into the double digits, lowest in three years
Spot market iron-ore prices dropped again overnight despite news that steel production in China, the biggest iron-ore-consuming nation, continued to rise in early August.
This is the first time iron ore has dropped below the $100 mark since 2009, when the market slumped due to the global economic crisis. The numbers, says analysts, seem to confirm what the state-backed institution China Iron and Steel Association (CISA) said last week: the country's steel output could shrink for the first time in 31 years.
The price for iron ore fines dropped to $104 a metric tonne for delivery into China, London price provider the Steel Index, or TSI, reported. This is down from $106 on Tuesday, and was the lowest since December 2009.
The commodity has been free falling consistently in recent weeks, from a 2012 peak of $149 a tonne in April. High inventories of the steelmaking material at Chinese mills, say experts, are mainly to blame.
In addition to higher exports from Australia, Brazil, other Latin American producers and Africa, the lifting of a ban on iron-ore production from Karnataka in India, which typically increases its ore exports after the monsoon season, has also played a role in pricing, Barclays Capital representatives told the Business Spectator.
The change in Indian strategy with the Karnataka restart it said to pose a "medium-term supply risk," which is cutting into margins.