Iron Ore Is In Freefall Once Again

Lower prices are a consequence of increased production. Image: Shutterstock.

Iron ore has been in freefall again over the past week after the recent run of Chinese data and lack of material stimulus measures for the economy undermined sentiment about the economy.

Of course, in no small part, huge inventories in China have also contributed to the fall in prices while the increase in production from Australia as production comes online is also having an impact.

For the local economy none of this is really news.

The consequence of increased supply in the manner that Australia and miners in Western Australia’s Pilbara have invested in infrastructure is that this fresh supply should, or is at least likely to, put downward pressure on prices – all other things being equal.

But the good news both for the economy and Australia’s iron ore exporters is that volumes appear to be holding up, with Port Hedland shipping 34.43 million tonnes in March, up more than 27% than February.

It seems iron ore buyers are just trying to find an equilibrium price – or at least one that approximates one.

Chart: Barchart

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