After looking like it would bust above $100 a tonne earlier this week, the benchmark iron ore prices has fallen over the past two days, moving back below the $90 a tonne level, according to data from Metal Bulletin.
Vivek Dhar, Mining and Energy Commodities Analyst at the Commonwealth Bank, says that reflects a reluctance from Chinese steel mills to buy at current levels, meaning any potential price spike above $100 a tonne may be delayed until next month.
Here’s a snippet from a research report released by Dhar today:
Iron ore prices continued to drift lower as Chinese steel mills refrain from purchasing seaborne iron ore cargoes. Mills have been reluctant to buy seaborne iron ore given that Vale have not officially cancelled or amended long term iron ore supply contracts with them. Steel mills are also looking to draw down on their iron ore inventories and then port stocks, before looking to the seaborne market.
We still expect the benchmark iron ore price to spike to $100 a tonne on expectations that markets eventually price in around 70 million tonnes per annum of supply disruption in iron ore markets, equivalent about 4.5% of seaborne supply.
The response by steel mills though suggest that an iron ore price spike may be delayed to March.
According to data from Steelhome, Chinese iron ore port inventories fell to 137.8 million tonnes in early February, moving further away from the record level of 161.98 million tonne set in June last year.
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