Iron ore continued to fall, closing at a seven-month low and approaching $100 a tonne, a level that is causing some high-cost production to be shut down.
The raw material for steelmaking has fallen from more than $140 a tonne early this year to below $106 on concerns about the outlook for demand in China. Steel consumption has not picked up as some investors had expected in March.
In the absence of major new stimulus measures from Beijing, the main focus for iron ore is cost support. While major global miners such as BHP Group or Rio Tinto enjoy very low costs and high margins, some marginal production locations – for example, in China or India – will be hurt if prices fall further.
“Cost support will be an important consideration,” Commonwealth of Australia analyst Vivek Dhar wrote in a note. “Iron ore will struggle to stay below $100 a tonne if Chinese steel demand moves sideways this year.”
Iron ore fell 3.1% to $105.85 a tonne by 10:22 a.m. on the Singapore Exchange. Dalian Commodity Exchange futures were down 1.5%, while Shanghai steel futures were mixed.
