The price of iron ore is trending back toward the $US60 a tonne mark after its most recent losing streak extended to three sessions, on the back of downbeat comments from the China Iron & Steel Association.
At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US61.20 a tonne, down 1.3 per cent from its prior close of $US62.00 a tonne.
The near 18-month bear market has led the commodity down 55 per cent from 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 recent streak of red sessions has been driven by a renewed focus on oversupply concerns as investors overlook potential positive drivers in the form of a weakening US dollar, rising oil prices, fresh stimulus from Beijing and signs of some supply exiting the market.
The oversupply narrative has been a hot topic as the likes of BHP Billiton, Rio Tinto and Brazil’s Vale press ahead with plans to expand capacity in the coming years despite the price falls.
Fortescue Metals, Glencore, Cliffs Natural Resources and WA Premier Colin Barnett have been among the sternest critics of the tactics, with independent senator Nick Xenophon this week declaring plans for a Senate inquiry into the strategies of BHP and Rio.
Until today neither Labor nor the Coalition government had hinted at a desire to back the proposal,
But this morning Tony Abbott appeared to back calls for an inquiry, saying: “We do need to know the facts ... what we don’t want to see is predator behaviour by any company.”
Senator Xenophon is also reported to be making progress in negotiations with Treasurer Joe Hockey’s office on the creation of a joint select committee to analyse Fortescue’s claims BHP and Rio are operating to the detriment of the nation.
The committee would include MPs from both houses of Parliament and be headed by a Liberal MP.
The development came as Fortescue took its campaign to new levels yesterday with the launch of a website called “Our Iron Ore” that appears to target BHP and Rio without specifically naming the mining giants.
“Multinational companies are failing to act in an economically rational way, choosing to oversupply the iron ore market in the medium term through brownfields expansions rather than ensure their investments do not worsen Australia’s terms of trade,” the website claims.
While the rising supply risks are clear to the market, demand from leading consumer China remains a key point of contention as debate rages over likely future demand.
The China Iron & Steel Association weighed in yesterday, suggesting the oversupply in the seaborne iron ore market would persist until 2019 or beyond due to flat demand and climbing production.
The industry association also said China’s steel consumption would likely slip 6 per cent this year.
Source: Business Spectator
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