Australia's iron ore export revenue fell nearly $A1 billion in November as the slump in the global demand for steel led to a 24 per cent drop in monthly shipments.
Export figures from the Australian Bureau of Statistics show iron ore sales were slashed by 26 per cent in November, from a record $3.62 billion the previous month to a five-month low of $2.68 billion.
Volumes from Australia's ports dropped from 26.3 million tonnes to 20 million last month, the lowest this year, as Rio Tinto pulled back shipments because of customer requests and BHP Billiton and Fortescue Metals Group were hit by operational problems.
Shipments were down nearly a third from the record 29.5 million tonnes shipped in July.
The figures show the big impact of a sudden drop-off in Chinese iron ore buying as the global financial crisis hit steel demand and mills started working through stockpiles.
Revenue is expected to slide further in coming months as this year's iron ore and coking coal contract negotiations yield big price cuts that could reduce the nation's revenue by $30 billion next year, based on analysts' price forecasts.
The data will be seized upon by Chinese steel mills as they push for a reported 40 per cent cut in contract iron ore prices and try to impose it from the start of 2009 - three months earlier than new contracts usually kick in.
As well as a volume drop, Macquarie analyst Jim Lennon said, there was a fall in US dollar prices at the port for Australian iron ore exports, with the average price for fines falling from $US88 a tonne in September to $US78 a tonne in November.
This reflected a greater proportion of spot market sales over contracts, he said.
Rio Tinto pulled back on spot sales after prices collapsed in October and has complied with customer deferral requests on contracted volumes.
BHP, however, has sold every tonne it could to spot markets at prices substantially below contract, while accepting deferral requests.
The news is not all bad for BHP and Rio as they approach annual negotiations. Preliminary port figures show a rebound in iron ore exports, and spot prices rebounding 24 per cent from lows they hit in November.
BHP and Fortescue boosted production in December, port statistics show.
"The latest data from the iron ore market are encouraging for the first time in a while," Mr Lennon said. "The strong recovery in Australian exports seems in part to reflect a flurry of spot selling by Australian producers below current contract prices."
Spot prices recently were at a 20 per cent discount to contract prices of $US100 a tonne, after being at a 40 per cent discount in October and November.
Perhaps explaining the Chinese rush to sign contracts, the December gains are partly because of an end to Chinese steel mill de-stocking and it will probably take some months for a truer picture of supply and demand to emerge.
"So far, what is absent is a recovery in end-use steel consumption," Mr Lennon said.
"Be careful about assuming this is the turning point."
Source: The Australian
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