Prices of ex-Australia iron ore of 62 percent Fe content for delivery to China’s Qingdao port, which were at $45-47.5/mt CFR last week, have decreased by $1/mt since last Friday and have started this week at $45-45.5/mt CFR. Meanwhile, steel futures prices in Shanghai have fallen to an all-time low as of today, November 23, amid tighter credit and poor demand for finished steel products, which is forcing many Chinese steel producers to restrict their iron ore purchases in order to reduce their ore inventory levels.
Amid the current negative sentiment, iron ore prices are at their lowest levels since 2008 when SteelOrbis first started reporting them. In the outlooks previously issued by research companies and investment banks, iron ore prices were expected to range at $45-55/mt CFR in 2016, due to major iron ore producers’ plans to cut production costs, the strengthening of the US dollar and slack finished steel demand in China. However, iron ore prices have already dipped below these expected levels, even before the end of the current year.
In this context, the downtrend of iron ore prices is prompting new forecasts to be issued regarding the trend of iron ore prices in coming period. According to Andy Xie, an independent economist and a former Asia-Pacific chief economist at Morgan Stanley, who had successfully predicted in 2012 that iron ore prices would decrease to approximately $50/mt CFR, has now stated that iron ore prices will drop below $40/mt before the year-end and will trade in the $30s/mt in 2016, as demand in China sputters. Mr. Xie has stated that the steel industry is reaching a critical point and that he is expecting to see major bankruptcies in the mining industry in the coming period.