In first 10 days of May, import
iron ore prices in
China moved on a rising trend amid increasing demand from Chinese steel producers, while they started last week at $63/mt CFR for
iron ore of 62 percent Fe content for delivery to
China's Qingdao port. In line with our expectations,
iron ore prices gradually moved downwards in the following days, ending last week at $60.5/mt CFR Qingdao. At the start of this week, prices have remained stable at $60.5/mt CFR and it seems that activity in the
iron ore market will be lively amid the intense competition among the big
iron ore producers.
In 2014, the
iron ore production of the world's biggest miners increased by 20 percent in total, despite the 48 percent year-on-year decrease in
iron ore prices. Many small and medium-size
iron ore producers had to halt
production since decreasing
iron ore prices fell below their
production costs and Australian producer Fortescue, which was once among the biggest
iron ore producers, started to find it difficult to stay in the market. In this context, in recent days Andrew Forrest, one of Fortescue's directors, claimed that Rio Tinto and BHP Billiton are continuing to overwhelm the market with excessive
iron ore supply despite decreasing
iron ore prices and that this situation is negatively affecting the Australian economy. Accordingly, Fortescue has decided to start a campaign against the big producers in order to prompt an official investigation. Mr. Forrest stated that medium-size producers such as BC Iron, Cliff Natural Resources and Atlas Iron are also on Fortescue's side.
All eyes are now on the Australian government. However, some statements by government officials indicate that Fortescue's campaign will be to no avail as it is impossible to prove the accusations that Rio Tinto and BHP Billiton are overwhelming the market with their "predatory volume strategy". Also, both producers'
iron ore sales prices are higher than their
production costs and they are making profits, all of which is legitimate in terms of free trade regulations and cannot be termed a "predatory volume strategy".
Given these considerations, it seems that it will not be possible to block the big
iron ore producers' plans to increase their
production volumes, despite the opposition of the small and medium-size producers. Accordingly, after the small improvement in
iron ore prices from mid-April up to the third week of May,
iron ore prices are expected to continue their downtrend in the coming period.