Iron Ore Price Craters
No sign of any support for tumbling world iron ore prices which lost nearly 12% last week and are now down more than 17% so far in September with a week to go.
This week’s performance is the worst since May 2016 and the losses on the physical market (as shown by prices from the Metal Bulletin) are being matched by big losses on futures markets in Dalian in China and Singapore.
Watch for these losses to again put pressure on the prices of major iron ore companies on the ASX this week.
The Metal Bulletin’s 62% Fe Iron Ore Index price closed at $US63.56 a tonne (delivered to northern China) on Friday - a fall of $US2.53 a tonne on the day (3.8%) and down from $US72.13 a tonne per tonne at the end of the previous week.
The price of nickel, a key raw material in stainless steel making, also fell in China and on the LME. (See separate story).
The sharp fall last week saw the price of Fortescue Metals shares lose more than 6% while BHP Billiton shares closed down 2.5% and Rio Tinto shares lost 1.9% (despite the increase in its current share buyback).
The production cuts are due to start around November 15 and will cover the so-called ‘heating season’ in China which lasts until March 15 next year (China’s 2016 coal production rises were based on the same timetable after a sharp slowdown in supplies from the big cuts earlier in the year and rapid escalation in prices).
These cuts were part of the move to try and curtail and reduce loss-making production of coal and iron ore by forcing Chinese steel companies to cut capacity.
Those capacity cuts have continued in 2017 but with the China’s National Congress meeting next month to select a new leader and leadership team for the next five years, the government is trying to make sure the skies are blue and smog free in and around Beijing.
The cuts are playing havoc with futures markets inside and outside China - iron ore prices have tumbled, but coal prices remain fairly solid with the Metal Bulletin reporting that its premium hard coking coal index fell 5% by Friday to $US199.87 a tonne.
The Australian index for similar quality coal ended the week at $US201.52, a fall of 2.4% over the week.
“Buying activity from India picked up recently and that cushioned the fall in fob Australia prices,” the Metal Bulletin commented.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.