Iron Ore Spot Prices Drop Below $100

The net result is traders are dropping their offers on a daily basis recently in an effort to attract buyers. However, there are few takers as the mills are opting to sit on the sidelines as spot iron ore prices slide.

With concerns that steel demand in China is slowing, there could be a glut of ore on the market this year and next. According to a report by Bloomberg, the global seaborne iron ore surplus will increase from 14 million metric tons last year to 77 million tonnes in 2014 and 145 million metric tons in 2015 as exports from Australia and Brazil increase due to expanded capacities.

One of our iron ore and steel trading sources in Asia advised us yesterday that Chinese mill bids on iron ore that had not been confirmed have been withdrawn and the mills are taking a wait and see position. He went on to say, “Steel prices not issued today from anyone due to this additional big drop domestically.” He told us to expect Chinese steel export prices to fall although not to expect new price offers for another week to ten days due to all of the uncertainty.

We also learned from our Asian source that one of the questions being posed at the moment is if the 150 million metric tons of domestic (Chinese) iron ore production could be potentially halted with prices below $100/dmt. The $100 level is considered to be the Chinese cost of production on these particular mines (not all production will be impacted).