The price of iron ore slumped to a 7-week low and metallurgical coal traded at its lowest level since August on Wednesday.
The benchmark CFR import price of 62% iron ore fines at China's Tianjin fell to $133.40 a tonne on a level last seen at the end of October, while FOB premium Australian coking coal declined to $136.30 a tonne, the lowest since August 2, according to data provided by SteelIndex.
Pushing prices down were renewed worries whether economic growth in China, the world's number one importer of the steelmaking raw materials, would be sufficient to absorb a massive increase in supply.
China buys roughly 65% of the world's 1.2 billion tonne seaborne iron ore trade and after an astonishing 30% jump in 2013 to an estimated 92 million tonnes absorbs almost a third of all coking coal exports.
Chinese mills are still forging steel at a rate of more than 2 million tonnes per day – almost as much as the rest of the world combined – but the industry suffers from chronic overcapacity and low profitability.
Cargoes from the world's largest exporters in Brazil, Australia and South Africa have been edging out generally low-quality domestic supply, with imports into China reaching a record high of 77.8 million tonnes in November, but the questions now becomes whether surging supply is about to overwhelm demand.
New research by Australia's Bureau of Resources and Energy Economics (BREE), the country's official forecaster, show another sharp increase in exports of iron ore and coking coal, which may coincide with a slowdown in China as the country's red hot construction sector cools and the country moves from an investment to a consumer-led economy.
BREE predicts that while Chinese iron ore imports will grow 7.4% next year, the world's top exporter Australia will increase cargoes a whopping 22.1% to 709 million tonnes as projects by Rio Tinto (LON:RIO), Fortescue Metals Group (ASX:FMG) and BHP Billiton (LON, ASX: BHP) come on stream.
Brazil, led by world number one iron ore miner Vale (NYSE:VALE), is set to up exports 9.1% to 352 million tonnes.
India, which has seen exports fall from 120 million tonnes to close to just 11 million tonnes this year, will also re-enter the market as a self-imposed ban on exports expire and stockpiles are sold on.
With more limited supply growth and no new major projects coming on stream, the outlook for the coal price is better.
Chinese imports will increase a still respectable 7.8% and met coal exports will show more modest growth with Australia, which at 168 million tonnes is expected to export three times more than second placed US, growing at just under 4%.
US exports will decline for the the third year in a row, dropping 4.6% in 2014.
Iron ore is second only to the seaborne crude oil trade and represents close to 25% of global dry bulk cargoes with coal a close second.
More than 35% of mined iron ore is shipped and 12% of global coal production is carried by sea.
Image of Port Hedland iron ore terminal courtesy BHP