Iron ore prices continue to fall on China demand fears

Iron ore prices continued to decline due to concerns about China’s economic outlook, with futures approaching $100 per tonne, a level that could impact higher-cost producers, as reported by Bloomberg on Wednesday.

The commodity dropped over five per cent in Singapore on Wednesday, falling from over $140 per tonne earlier this year. Steel demand in China has not picked up as expected, leading to the downward trend in iron ore prices.

The focus is now on cost support for iron ore, with major global miners like BHP Group Ltd. and Rio Tinto Group benefiting from low production costs. However, marginal producers in countries like China and India may face challenges if prices continue to fall.

Analysts suggest that iron ore prices may struggle to stay below $100 per tonne if Chinese steel demand remains flat this year. The current price is at $104.30 per tonne in Singapore, with futures in Dalian and steel contracts in Shanghai also declining.

If prices continue to fall, higher-cost producers may need to cut back or stop operations, leading to a market rebalancing.

Non-mainstream producers face cost thresholds around $90 to $95 per tonne, while major producers may consider cutbacks below $75 to $80 per tonne.

Iron ore prices have declined due to weak demand in China, worsened by real estate problems and debt issues among major developers.

The lack of substantial pro-growth measures from China’s recent political meeting has increased market uncertainty.