Returning after a three-day break, the spot iron ore price tumbled on Tuesday, continuing the familiar choppy price action seen in recent months.
According to Metal Bulletin, the spot price for benchmark 62% fines fell by $2.83, or 4.27%, to $63.41 a tonne, trimming its year to date advance to 45.5%.
Metal Bulletin put the decline down to weakness in spot rebar and futures pricing.
Underlining just how wild the recent price action has been, and demonstrating that speculative forces have yet to exit the market, in six of the past eight sessions the price has moved more than 4% in any one direction.
Pointing to the likelihood that further losses may arrive today, Chinese rebar, iron ore and coking coal futures all slipped in overnight trade.
Rebar and coking coal finished down more than 1%, overshadowing a smaller 0.79% drop in iron ore.
Overnight, Australia’s government released its iron ore price forecasts as part of the federal budget, seeing the spot price averaging $55 a tonne (FOB) for the fiscal year ahead, significantly higher than the $39 a tonne level forecast in the 2015/16 mid-year economic and fiscal outlook of last December.
It’s important to distinguish that the forecasts are for free on board (FOB) spot pricing, something that does not take into account freight costs as seen in the more commonly cited cost and freight (CFR) spot pricing.
“There are downside risks with treasury’s practice of using a recent average for the iron ore price incorporating the recent rally in the iron ore price and hence exposing the forecasts to any correction,” said Ivan Colhoun, chief markets economist at the NAB, in a research note received overnight.