Iron ore suffered the biggest weekly decline in history: falling below the $100 mark for the first time in 14 months.

The 20 per cent drop in just one week has halved in two months-against a backdrop of recent soaring prices of energy and industrial metals, iron ore, once known as the "crazy stone", is now alone in the bleak picture rarely seen in commodity markets.

The black variety has experienced a nightmare week over the past five trading days. Singapore iron ore futures fell as low as $99.50 on Friday, falling below the $100 mark for the first time in 14 months. According to statistics, Singapore iron ore futures fell more than 20% this week, the worst weekly performance on record.

As the price of iron ore continues to fall, its volatility has reached its highest level in five years.

In the domestic futures market, the main iron ore futures contract of Dashang fell more than 6% on Friday, hitting 628.5 yuan per ton at one point, the lowest since May 2020.

The collapse in iron ore prices has also made it one of the worst-performing commodities of late and a clear "alternative" against the backdrop of a broad boom in commodity markets: while iron ore has fallen, aluminium prices have recently soared to 13-year highs. Global natural gas prices are breaking all-time highs one after another. Even in black, coal futures hit new highs earlier this month.

Why does iron ore fall one after another?

Analysts pointed out that since the beginning of the second half of the year, as domestic crude steel production has been reduced, international iron ore prices have begun to fall. Under the background of strengthening the "double control" of energy consumption in many places, the steel mills in Jiangsu, Zhejiang, Liaoning, Guangxi, Shandong and other places have implemented electricity restriction and production restriction, and the domestic steel output has decreased obviously.

"the sharp fall in iron ore prices is mainly based on the view that" this year's production control efforts are likely to be strictly enforced, "said Ed Meir, an analyst at ED&F Man Capital Markets.

Last week, it was also reported that the two major documents of the iron and steel industry, "implementation Plan of carbon Dafeng in the Iron and Steel Industry" and "guidance on promoting the high-quality development of the iron and steel industry, are expected to be officially released before the end of this year, which may speed up the green and low-carbon development of the steel industry. It also affects the price of iron ore to a certain extent.

This is a marked shift from the first half, when steelmakers increased production and consumption was boosted by optimism about the economic outlook and stimulus measures. Singapore iron ore prices hit an all-time high of more than $200 in May.

UBS said iron ore prices had fallen "faster than expected". Port inventories are up 10 per cent from a year earlier, and expectations that demand will weaken further are in line with expectations that global supply will rise. UBS expects iron ore prices to average $89 a tonne next year, down 12 per cent from previous forecasts ($101) and $80 a tonne in 2023, down from a previous forecast of $85.

While iron ore fell, the price of downstream commodity steel remained relatively high. CITI Group said that as the rate of production reduction in China has greatly outpaced the decline in demand, the market supply is still tight. Spot rebar is still close to its highest level since May, although it is 12 per cent below that month's high. At the same time, inventories nationwide have fallen for eight consecutive weeks.

The three iron ore giants in the world have plummeted.

It is worth mentioning that while the return of international iron ore prices to double digits would be a relief for steelmakers, it would be a heavy blow to the big global miners who enjoyed huge profits during the rise in the first half of the year.

Shares of Rio Tinto (Rio Tinto Group), BHP Billiton (BHP Group) and Vale (Vale SA), the world's leading iron ore giants, all tumbled this week, with the smallest drop of more than 6 per cent. Shares in both BHP and Rio Tinto have hit new lows for the year, while Vale is close to its lowest level since late January.

UBS has also recently downgraded Vale by two notches from "buy" to "sell", believing that Vale and Rio Tinto will be most adversely affected by falling iron ore prices.

For now, however, the mining giants are expected to be able to afford lower prices because their production costs are likely to be less than $20 a tonne, but the impact on small miners will be more pronounced. When the market rebounds strongly, these miners tend to reopen or increase production, while processes such as transporting ore from mines to ports make them more sensitive to price changes.

In addition, the fall in iron ore prices will also be bad news for the Australian economy, which relies on iron ore exports, which account for about 40% of total commodity exports. This week, the Australian dollar fell below 0.73 against the US dollar, its lowest level since late August.