Hot on the heels of last week’s rejection by competitors and the ACCC of Andrew Forrest’s idea that Australia’s big producers get together to restrict production and drive iron ore prices higher comes news that iron ore is tanking again.
On Friday, futures on the Dalian exchange were absolutely hammered at one stage with May down 26 at 406 and September off 15 at 416. But they staged a rally late in the day to finish at 417 and 421 respectively.
That saved iron ore in US futures trade from closing at a new multiyear low. But the June 62% Fe CFR China (TSI) Swap Futures, still managed to fall back under $52 at tonne. Just. But the close at $51.99 and the expectation that prices will continue to fall as the big players still push for market share is putting further downward pressure on iron ore.
For a change though, that won’t hurt Joe Hockey’s budget position. That’s because it appears Treasury has already assumed a price of $50 a tonne.
The question for iron ore traders, our miners and increasingly bond holders and the miners bankers is just how far will iron ore fall.
Fortescue Metals has already underperformed the ASX in the past year and its downtrend looks like it might be re-emerging once again. So the news that iron ore is falling again is likely to place more pressure on FMG and other monoline Australian iron ore miners’ share prices.
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