A fresh buildup in stockpiles of iron ore at China’s ports and sinking steel prices fueled the commodity’s return to a bear market. Australia’s average annual iron ore production rose from 170 million tonnes to around 660Mtpa between 2000 and 2014, with the price hitting an all-time high of $US190 per tonne in 2011.
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“If the iron ore price falls four bucks today and crashes to $48, it’s not going to affect the cash flow of the business”, Flanagan said.
“Key concerns are expanding low-priced supplies from Australia and Brazil, while demand slows from China”, ANZ analysts said in a note.
Investors in the iron ore sector ought to batten down the hatches, because the seas are about to get a whole lot rougher.
Iron ore prices have fallen to their lowest level since April as concerns over stockpiling in China slashed 5.4% from the commodity’s price in offshore trading. With some assistance from its contractors, the miner was able to resume operations the following month.
“The slump in equities reflects a lack of confidence in China’s economy, which damps the demand outlook for industrial commodities”, Wu Zhili, an analyst at Shenhua Futures Co.in Shenzhen, said on Wednesday before the price data. Australia’s top producers will generate more than A$615 billion ($456 billion) in revenue in the 10 years to 2024, surpassing the previous decade, the council said in a policy paper.
The report also makes the case that any form of intervention in the market to regulate supply would most likely end in failure and would be against the national interest.
But the speed with which the iron ore price has fallen – around 25 per cent in a matter of weeks – has surely made life extremely hard for the juniors.
Iron ore’s decline validates bearish forecasts from Goldman Sachs Group Inc.to Citigroup Inc., which said that gains in the second quarter wouldn’t last as low-priced output would rise, spurring a glut.
First (Other OTC: FSTC – news), the mining companies expected iron ore prices to tumble as dramatically as they have, and kept the information to themselves.
Under the agreement, Atlas has agreed to pay BGC an option fee of A$3.45m ($2.6m) in its shares representing A$3m ($2.3m) credit against the future purchase of the Mt Webber crushing as well as screening plant.
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The fast-changing makeup of the iron ore market indicates it will be an industry that, by and large, will only support the biggest miners.
