Global iron ore prices see worst single-day decline on China slowdown

Prices fell $6 a tonne in Monday's trade, the steepest decline in recent years, analysts said. In China, spot ore slumped to $110 a tonne

Global iron ore prices saw a steep fall on Monday, as China reported a slowdown in exports and a fall in its steel consumption. Prices fell $6 a tonne during Monday’s trade, the steepest single-day decline in recent years, analysts said.

In China, spot ore slumped to $110 a tonne on a cost-and-freight basis, compared with $118-120 a tonne a week ago and $125 a tonne in January. Since February 17, prices have declined $10 a tonne.

“The bearish sentiment prevailing in the market, with tight capital issues and increasing supply from Australian miners, had been pressuring prices for some time. Monday’s fall in the Tangshan billet prices of RMB (renminbi) 30 a tonne and the sharp fall in the futures and swaps markets dented the sentiment further,” said Prakash Duvvuri, head of research at Delhi-based OreTeam Research.

On Tuesday, buyers stayed away from the market, owing to the weak sentiment.

“This downtrend is because of the signs of weakening demand for steel in China, following the release of trade data showing an unexpected decline in exports. Further, the country’s slowing economy has reduced the demand for steel, which has an incremental impact on the steel and iron ore stockpiles,” Duvvuri said.

As a result, prices for Indian iron ore fell to $95.5 a tonne for 63.5/63 per cent Fe fines at Visakhapatnam, on a free-on-board basis. This was the steepest fall recorded in a day, Duvvuri said.

For this grade, the lowest level in the past five-six years was $83 a tonne (September 2012). Between January 1 and March 10, spot iron ore prices have fallen by $20 a tonne. In February, China’s iron ore imports stood at 63.16 million tonnes (mt), compared with 86.83 mt in January. Now, it is possible the lower imports will help consolidate some of the lost ground in spot iron ore prices.

If current prices in China prevail, Indian iron ore exporters are set to see tough times ahead.

For the first 11 months of this financial year, India’s iron ore exports fell 25 per cent to 14 mt compared to last year. Duvvuri said Goa would see an immediate impact of the current prices —traders might not show much interest at the Goa auctions.

Duvvuri, however, says at the most, the prices might fall by $2-3 a tonne this week, adding a rebound is possible towards the end of this week.