A stunning bearish run in the price of iron ore threatens to drag the commodity below $US50 a tonne for the first time since early April.
At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US52.00 a tonne, down 3.9 per cent from its prior close of $US54.10 a tonne.
The commodity is now threatening to drop back near its 10-year low of $US46.70 a tonne, set in the first week of April.
Over the past 17 sessions the commodity has risen just once as traders take a set against it on oversupply fears. The descent has gathered pace over the past four sessions, with falls of just shy of 15 per cent through this period.
A number of factors have been behind the retreat, including a lift in supply as Australian exports test a new high, a slumping oil price and concerns about the Chinese economy as the Shanghai market staggers after a long bull run.
Another key to the move has been news of a return to growth in Chinese stockpiles for the first time since April. The declining stockpiles had been crucial to a strong rally through May and early June, but with an end to the retreat, investors are again eyeing softening growth in China and rising supplies from Australia and Brazil.
Further exacerbating the pain was news last week that China was making progress in providing space at its ports for larger Vale ships, a move that aids the Brazilian heavyweight’s expansion plans.
Iron ore’s sharp recent downturn has forced the stock of several local players sharply lower, with Fortescue Metals closing at a six-year low yesterday.
The Andrew Forrest-chair group lost over 5 per cent on the day and has yielded 22 per cent over the past two weeks and 62 per cent over the past year.
Also struggling is BC Iron, which gave up over 3 per cent yesterday and is down over 90 per cent through the last 12 months.
Mt Gibson lost 2.5 per cent yesterday and has plunged over 70 per cent since last July, while embattled Atlas Iron has tumbled more than 80 per cent over the past 12 months.
In London trade overnight, BHP Billiton weakened 2 per cent, while Rio Tinto closed down 1.1 per cent.
The downward move in iron ore has coincided with a sharp drop in oil prices, which reduces break-even costs for suppliers. Crude hit a three-month trough overnight, with its fall mirroring that of iron ore.
Other commodities have also been on the back foot, with copper touching a fresh five-month low in European trade.
Source :Business Spectator
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