Amid oversupply concerns and weaker demand period in the northern hemisphere due to summer, iron ore spot markets extended the slide overnight, sending the benchmark price tumbling to closer to the lowest level since October last year.
The price of Iron Ore 62% Fe, CFR China (TSI) dropped 2.9% to $US60.72 a tonne. That compares with a February 21 close of $US94.86, the highest since 2014—a 21.05% per cent drop.
In Singapore, SGX AsiaClear futures fell 2.1 per cent to $US59.70 a tonne.
Iron ore was to blame as the Australian dollar (AUD) continued to fall against its US counterpart and the local share market stayed on course for a fourth straight day decline.
High prices of coal and iron ore since early this year provided some confidence to the Reserve Bank of Australia (RBA), which indicated that it is content to leave interest rates on hold at 1.5 per cent this year. However, falling commodity prices may force the RBA to rethink its position in the second half of 2017, especially because other measures appear to be working to slow down the growth rate of housing prices.
Analysts have a broad range of predications about price, but there is one thing they agree on; it is on nosedive. The bearish market is expected to continue until probably settlement around $50 a tonne.
Why? Rising inventories at Chinese ports, rising supply from Australia and Brazil, rising output within China, and expectations that steel demand within China would ease amid government efforts to slow both property speculation and credit growth among many others reasons are cited. In addition, the government is trying to curb pollution by closing some steel mills.