Iron ore keeps falling, drops below $43 a tonne
November will go down in the books as one of the worst periods for commodity prices in around 45 years, with most of them continuing the downward trend on the very last day of the month.
Iron ore was the one hit the most on Monday. According to Metal Bulletin, the spot price for benchmark 62% fines fell 1.53 cents to $42.97 a tonne, while the MBIOI-58 Premium Index ended the month at $38.15 a tonne — a fall on $3.00/tonne over the last two days of November.
If that sounds bad, then you might not want to hear that the most-active iron ore futures in Singapore sank below $40 a tonne today for the first time ever, according to Bloomberg.
A flood of cheap new supply from the top producers has put pressure on prices since late 2013 leading to a drop of 47% in the price during 2014. Declines so far this year come to more than 40% and today’s price compare to $190 a tonne hit February 2011.
Decline to continue next two years — Goldman
The latest weakness is being blamed on declining demand in China where steelmakers buy nearly three-quarters of the seaborne trade and forge almost as much steel as the rest of the world combined.
The China Iron and Steel Association reported last week that steel consumption in the country was down by almost 6% year on year during the January to October, a sharper than expected slowdown. That compares to a 3% slump in output so far this year after 30 years of growing production at the country’s steel mills.
Earlier this month, Goldman Sachs (NYSE:GS) warned prices for most commodities had not yet bottomed. According to the investment bank, spot iron ore prices are expected to decline to $44 a tonne in 2016 (we are already there) and $40 a tonne in 2017.