Vale says iron ore reaching a bottom, will improve within '2-3 weeks'

Vale believes spot iron ore prices are expected to reverse course and recover from recent falls as current levels approach the marginal costs of several producers.

"I believe the recovery will happen soon," José Carlos Martins, the Brazilian miner's director of iron ore and strategy, said during a conference call discussing the firm's second quarter results, adding that a modest recovery in China will boost prices:

"It's not that miners will shut down; at these current levels many producers decrease production and start to stockpile material waiting for higher prices.
"Iron ore prices are reaching the bottom. These prices may stabilise or even see a slight recovery within two to three weeks."

Iron ore prices fell again on Friday with the benchmark import price of 62% iron ore fines at China's Tianjin port dropping almost 1%  to $116.20 a tonne, down 14% since the start of July and well below the $175.40 a tonne the steelmaking ingredient was trading at this time last year.

Chinese import prices  – the country is responsible for consuming 60% of the world's iron – are now the lowest since December 2009 according to data provided by Steelindex.

In October last year ore shed over $60 a tonne over a months to briefly trade below $120. Iron ore first traded above $120 a tonne in January 2010 and July that year also saw a short-lived dip to $117.90. argued on Friday these dips and recoveries show $120 had in the past provided a strong price floor for traders but this theory is now being thoroughly tested.

Reuters reports small Chinese traders are being forced to sell off loss-making stockpiles and quotes Rafael Halpin, China analyst with the UK consultancy MEPS: "Iron ore prices could go into free-fall until end-user demand for steel picks up in the autumn."

On Wednesday Nomura steel analyst Matthew Cross argued that although the floor price of $120 has been breached "the destock may have just begun. Iron ore prices fell roughly 35% during both previous destocks, from US$180/t to around US$120/t, a similar decline from 2012 iron ore price highs of US$150/t suggests potential downside to around US$100/t."