However, small and medium-sized iron ore producers have a hard time competing with these large companies due to their higher production costs. Iron ore prices, which have been declining during the current year, have put pressure on small and medium-sized iron ore producers' margins in China.
On September 16, the Chinese central bank announced it is going to provide funds of $81.4 million to local banks to increase economic growth. The announcement gave hope to the market that the Chinese economy may revive again and iron ore prices have increased by $2/mt last week following this news. However, a few days ago, the Chinese government gave signals that it may abandon the incentive policy and downward price expectations have again started to prevail in the iron ore market. For example, today, September 23, ex-Australia iron ore of 63.5 percent grade and above decreased below the psychological threshold of $80/mt CFR China. Iron ore prices were expected to reach this level at the end of 2014 and the markets have become concerned that this price level has already been reached in September. The trend of iron ore prices is expected to become clearer after the Chinese government's upcoming announcements.