THE price of iron ore has given up some of its recent gains in overnight trade, sinking under $US65 a tonne as investors remained cautious about a lingering oversupply.
At the end of the latest offshore session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US63.60 a tonne, down 2.3 per cent from its previous close of $US65.10 a tonne. The commodity is now just 4 per cent above the five-and-a-half-year low of $US61.10 a tonne set earlier this month.
The red session brings an end to iron ore’s best streak this year with the commodity seeing positive or flat numbers for the six sessions prior.
It appears that scepticism about the recent gains was one driver of the latest losses as many analysts continue to believe that the floor price has not yet been reached given giants Rio Tinto, Vale and BHP Billiton continue to ramp up production.
Investors had recently been betting on an increase in activity out of China following the upcoming Lunar New Year, but some reports suggest trade has been light in the lead-up to the holiday, which has contributed to volatility.
The persistent oversupply fears have most analysts setting forecasts in the $US60-$US65 a tonne range for 2015 and 2016, with many tipping a dip into the $US50s at some stage this year.
The price weakness was borne out in half-year results from Australia’s third largest iron ore miner Fortescue Metals Group yesterday, with the ASX-listed group’s boss Nev Power querying the actions of the likes of Rio and BHP in dampening market sentiment after announcing an 81 per cent profit fall.
“As we know in the iron ore business there has been plenty of talk about what projects will come on but they have been delayed and not come on as forecast, but this apprehension of excess supply is influencing the price,” Mr Power said, hinting that Fortescue believes the price should be higher than it is.
Source: The Australian
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