[Iron Ore] Iron Ore prices astound – to the downside

UNITED KINGDOM July 23 2015 9:07 AM

LONDON (Scrap Register): Volatility is alive and kicking for iron ore markets, said The Steel Index. The 8th of July saw the biggest one day percentage fall since TSI began compiling the index as TSI’s benchmark 62% Fe fines index collapsed -11.3%. 

Panic selling was in full swing amid chaotic Chinese equities markets, a looming threat of a “Grexit”in Europe and on-shore iron ore futures markets hitting ‘limit down’ buffers for three consecutive sessions. 

The alarming macro backdrop precipitated the setting of an all-time low of $44.10/dry ton for benchmark 62% iron ore being set. 

The key driver for the fall, which the above only served to exacerbate, was primarily plunging finished steel prices. 85% of Chinese mills were reportedly losing money in June, with mills pouring close to $30/t of losses for every ton produced. 

This is typically a seasonally weak period, though the softness of this year proved a surprise, nevertheless. Mills often reduce production to offset demand weakness, which in turn lowers the overall appetite for iron ore imports. 

However, nor has volatility been all one-way. Prices are now back over the fifty dollar mark ($50.7/dmt as of July 22nd), although it is notable that this is not the first time this year that prices have dipped below $50/dmt. The first and second halves of the year look like different animals. As 2015 got underway, prices were over $70/dmt.