Steel Products Prices North America

Iron Ore Prices at Record Low

March 31, 2015

Iron ore prices, which for a period of time had firmed up around $60 per dry metric ton, have been sliding lately with The Steel Index (TSI) reporting 62% Fe fines at $51.0/dmt CFR Tianjin Port, China earlier today. This is the lowest level reported by TSI since they began indexing iron ore prices back in 2008.

Demand for iron ore has weakened as the Chinese economy slows and the Chinese central government concentrates on closing polluting plants, especially the older less efficient steel mills located close to Beijing.

Even though iron ore prices have weakened the big three iron ore mining companies: Rio Tinto, BHP Billiton and Vale are continuing with plans to expand production as they look to take market share from smaller mining companies. A weakening Australian dollar against the U.S. dollar is helping push the cost to produce ore from the two Australian companies (Rio Tinto and BHP) lower.

According to an article in the Financial Times, “An additional 100m tonnes of seaborne is expected hit the market this year, which Rio expects to be offset by 20m tonnes of demand growth and 80m tonnes of capacity going offline, mainly in China. However, many analysts are sceptical. Chinese producers have proved difficult to dislodge from the marketplace since decisions to shut state-owned mines taken into account factors other than economics.”

If the state owned facilities do not cease operations then the spot price of iron ore could very well fall below $50/dmt. At $51 as of Tuesday morning it seems it is only a matter of time before the $50 level is pierced.

Iron ore spot prices have now dropped by $11.3/dmt or 18.1 percent of its value over the past four weeks alone on 62% Fe fines. Over the past twelve months the high for 62% Fe fines was $119.4/dmt with today’s $51.0/dmt being the lowest reported by TSI.

There is a historical relationship between iron ore and scrap. We will need to watch iron ore spot prices to see if they continue to drop will there be an impact on world scrap prices which could ultimately impact scrap prices here in the United States.