The sharp slowdown in China and other emerging market economies have hurt the demand for iron ore.
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“A stabilisation in China’s steel prices remains the key to sentiment for iron ore but the industry needs to cut output for this to occur”, ANZ said in a note.
Mr Pervan said there may be some pick up in iron ore prices over the new few weeks as the Chinese placed their final orders for the first quarter steel production period.
This week, prices for the raw material hit their lowest in a decade at $40.30 a tonne, while futures contracts 0#SZZF: fell to record lows of $33 a tonne for 2016. Prior to TSI’s records and ahead of the spot-based system that followed the annual pricing era, it was the weakest since 2005, according to data compiled by Goldman Sachs.
A slow-down in China’s manufacturing sector has hit oversupplied commodity markets hard.
“Chinese steel mills are not restocking iron ore as they are suffering extreme tightness in liquidity and deeper losses from continuous declines in steel prices”, said Xia Junyan, an analyst with Everbright Futures in Shanghai. Mr Hynes said iron ore company margins had been able to cope with falling prices because of continued cost cutting and the weaker Australian dollar.
It could yet get worse, however, with analysts not foreseeing the usual bounce ahead of the Chinese New Year holiday.
“To simply attribute the difficulties in one country or region to the Chinese enterprises is not responsible, nor is beneficial for solving the industry difficulties in their own country or region and promoting the smooth development of the global steel industry”, wrote CISA.
More steel mills in China’s Shanxi province have halted production due to shrinking demand and shortage of cash, industry consultancy Custeel says.
As Australia heads into summer, China is leading into the winter months which could well lead to a further fall in demand. The most-traded May rebar on the Shanghai Futures Exchange closed down 1.3 percent at 1,635 yuan ($256) a tonne.
Stocks of iron ore at China’s ports climbed to 87.65 million tonnes on November 27, the highest since May, data from SteelHome showed.
Instead, the commodity slipped another 0.9% to just US$40.75 a tonne, according to The Metal Bulletin.
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A procurement official from a 3 million mt/year steel mill in Hebei disclosed that they have been relying on iron ore supplies from term contracts despite prices being than on the spot market because of tightness in cash.
