The price of iron ore has slipped for a second straight session as investors remain concerned about a softening Chinese economy and rising supply from Brazil and Australia.
At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US62.00 a tonne, down 0.5 per cent from its prior close of $US62.30 a tonne.
The commodity has endured a horror 18 months, remaining 54 per cent below the level it started 2014 despite a near 35 per cent surge from the 10-year low of $US46.70 reached on April 6 this year.
The latest falls, however slight, have been tied to news of weak Chinese data, with April retail sales and industrial production numbers falling short of expectations yesterday.
Investors were also hoping for more action from miners in curbing production, with BHP Billiton and Rio Tinto again reiterating expansion plans this week despite admitting they would cut back on capital expenditure.
“The iron ore and metallurgical coal markets are currently well supplied and we do not expect to invest significantly more in these businesses at this time,” BHP boss Andrew Mackenzie said, with Rio counterpart Sam Walsh noting his firm would also invest no new capital in meeting its targets.
The news is mixed for markets as it shows the big miners are amenable to tweaking their strategies, though for now unwilling to cut targets.
Such an outlook amid an oversupplied market has driven the federal government to trim its iron ore price forecast for the 2016 financial year to $US48 a tonne, from $US60 a tonne.
It has also led Goldman Sachs to again play down the recent recovery, suggesting the recent moves amount to a dead cat bounce in a long-term bear market.
“Market fundamentals will reassert themselves sooner rather than later,” analysts for the investment bank said this week, adding investors should “consider this as a window to take short positions”.
Despite the pessimism, rising oil prices, expectations of more stimulus from Beijing and a slumping US dollar are all providing support to the price and miners remain hopeful the $US46.70 a tonne price reached last month will represent the lowpoint in the cycle.
Source: Business Spectator
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