Iron ore’s latest losing streak has halted at seven sessions, with the commodity recovering a small portion of lost ground in offshore trade and stalling the plunge toward $US45 a tonne.
At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US47.60 a tonne, up 1.9 per cent from its prior close of $US46.70 a tonne.
The figure from the previous session represented a record low since The Steel Index began releasing the data in 2008 and was also the weakest mark since 2005-06 when miners used to set yearly benchmark contracts with Chinese steelmakers.
Meanwhile, iron ore for delivery to the port of Qingdao in China — another closely watched spot market — rose 2.1 per cent off its all-time low to $US48.06 a tonne.
The rebound is cold comfort for miners, who have seen prices sink from $US135 a tonne at the start of 2014, to below $US50 today, with the near 2 per cent recovery coming after over 10 per cent was wiped from prices over the past fortnight.
Price movements have caused severe strain for local miners, with Atlas Iron forced into a suspension yesterday as it undertakes a comprehensive review designed to shore up its balance sheet. The company said it may pursue asset sales to provide a buffer from the falling prices, with an update expected in about two weeks.
The Atlas news is among the most prominent signs of distress in the iron ore sector, though most local miners are now operating at a loss outside of the big two in BHP Billiton and Rio Tinto, which maintain healthy, if rapidly eroding, margins.
Among those seen operating in the red at current prices are BC Iron, which lost 11 per cent of its value during yesterday’s trade, Mt Gibson Iron, which sank seven per cent yesterday, and Fortescue Metals Group, which gave up 1.3 per cent. All three firms are trading at their lowest levels since the financial crisis, while Atlas was at an all-time low before requesting a trading suspension.
In contrast, stock in both Rio and BHP climbed between 0.6 and 0.7 per cent yesterday despite the glum outlook for iron ore. The two heavyweights enjoyed an even stronger session offshore as their London-listed stock surged 2.7 per cent and 4 per cent, respectively, outpacing a 1.9 per cent jump in the broader FTSE 100 index.
It augurs well for a rebound in beaten-down mining stocks during today’s session on the ASX, but analysts remain concerned it will amount to little more than a dead cat bounce amid recent forecasts of a dip to the $US45 a tonne mark in coming months.
Both Deutsche Bank and Capital Economics foresee a slump to $US45 or below, while US-based iron ore miner Cliffs warned last month that the tactics of BHP Billiton, Rio Tinto and Vale had the potential to push prices as low as $US30.
The bearish forecasts are largely related to an oversupply that is being exacerbated by stalling demand and rising supply, with the China Iron & Steel Association yesterday warning that iron ore demand will “remain weak” in coming months as steel demand contracts.
It comes as speculators help drive the price down, with Reuters reporting that money managers have nearly doubled their short positions in iron ore futures on the New York Mercantile Exchange since the beginning of the year, while other major speculators have increased their short positions by around 150 per cent.
The news helps explain rising volatility in the market and provides hope to miners that once the worm eventually turns, it could turn very quickly.
Source:Business Spectator
- metaljunction »
- Metal News
Metal News & Events
METALJUNCTION PUBLICATIONS
Coal Insights (English) Monthly
Coal Insights is a ready reckoner for anyone associated with coal. This publication is aimed at tracking everything related to coal in India.
India Coal Market Watch(English) Monthly
ICMW is a one-stop source for all news, data and research pertaining to coal demand, consumption, stocks, spot- and long-term prices with respect to the Indian Market.
India Steel Market Watch (English) Monthly
ISMW is a brand new high-end steel market report, covering all aspects of the steel industry in India.
Steel Insights(English) Monthly
Steel Insights delves into various facets of the domestic and global steel industry such as market fundamentals, raw material price trends, price forecasts etc.