The cash price for Australian iron ore delivered to China, the world’s biggest buyer, slumped 9.3 percent after Chinese steel prices declined.
The price for 62 percent grade ore fell $9.70 to $95 a metric ton yesterday, according to The Steel Index. It rose to $105.90 on Aug. 13, the highest this year. Prices for hot-rolled coil steel in China fell 2.1 percent yesterday and have declined 13 percent since Aug. 7.
The drop came as output rose in China and steel prices slumped, Tom Albanese, chief executive officer of Rio Tinto Group, the world’s second-biggest ore exporter, said yesterday. The Steel Index price has risen 32 percent this year as China’s 4 trillion-yuan ($585 billion) stimulus plan spurred demand.
“The steel market is overheated,” said Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd. The ore price may “move back towards $90 a ton near term,” he said.
The Baltic Dry Index, a measure of commodity-shipping costs, fell for a third straight day yesterday. Ore prices have likely “topped out” this year amid the declining steel prices, Liberum Capital analysts said this week.
Iron ore swaps for settlement this month traded at $99.25 a ton yesterday, according to SGX AsiaClear over-the-counter prices from Singapore Exchange Ltd. They indicate prices may drop to $90.08 by December.
Rio Tinto, BHP Billiton Ltd. and Fortescue Metals Group Ltd. are the three-largest iron ore exporters from Australia.
The ore price may re-test its highs later this year, ANZ’s Pervan said.
Source: Bloomberg
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