A deepening slowdown in China’s steel industry and higher iron ore exports from the largest miners are weighing on prices, said Sanford C. Bernstein & Co. NMDC, meanwhile, reported its Iron Ore production details for the first quarter.
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Iron ore, which is Australia’s most important commodity, fell for the ninth straight session overnight, plummeting a further 5.1% to just US$49.60 per tonne, according to the Metal Bulletin.
In the new report, titled “Iron Ore; The Bigger Picture”, consulting firm Port Jackson Partners noted that the Australian iron-ore sector benefited significantly from the resources boom, and ended the commodities boom in a stronger position than when it entered it.
The only producers that can generate positive cash from a price that low are companies that contribute to supply increases, such as BHP Billiton, Rio Tinto and Brazil’s Vale. But PJP said the global iron ore market was influenced by global trends and not Australian producers.
The price has fallen more than 30 per cent in 2015 and is a long way from the $US180-plus a tonne prices of 2011.
“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.
‘The iron ore price is in free fall and the economics remain horrendous. PJP said any intervention was likely to be “ineffective at best and counter-productive at worst”.
Collectively, the minnows mine less than 10 percent of Australia’s annual 650 million tonnes of sea-traded iron ore and they have suffered the most from weak demand from China.
However the company warned that it was not protected beyond the end of December and the ability to lock in prices and what they would be was unknown.
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.
What the report does achieve is it sets out a rational economic defence of what Rio and BHP did to lead Australia’s iron ore output from 170 million tonnes in 2000 to around 660 million in 2014.
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The Minerals Council report continues in this vein, offering solid and plausible reasons for what has happened, but skirting some of the more hard issues facing the iron ore industry.
