For the first time ever, the spot iron ore price has fallen below the $40 a tonne level.
According to Metal Bulletin, the price for benchmark 62% fines fell by a further 97 cents, or 2.42%, to $39.07 a tonne, the lowest level seen since daily spot prices first began in May 2009.
It was the sixth consecutive decline recorded and left the year-to-date drop at 45%.
According to Metal Bulletin, the continued weakness in iron ore ore corresponded with more pessimistic news on the health of the China’s steel makers.
“Member mills of the China Iron and Steel Association (CISA) produced an average of 1.61 million tonnes of crude steel per day during November 11-20, down nearly 5% from the previous ten day period, according to estimates from the industry body reported today in local media.” wrote analysts from Metal Bulletin in their Monday note.
There was also a bearish forecast offered by the China Metallurgical Industry Planning Institute, warning that Chinese steel production would likely outstrip demand in 2016.
“China’s steel sector will remain oversupplied in 2016 as the pace of contraction in output is exceeded by that in demand, a forecast by the China Metallurgical Industry Planning Institute (MPI) shows. Consumption is expected to total 648 million tonnes next year, while production will reach 781 million tonnes, the industry think tank said today.”
Pointing to the likelihood of further weakness arriving in the spot price this evening, the January 2016 iron ore futures contract on the Dalian Commodities Exchange finished the overnight session down 0.82% at 303.0 yuan, in line with the move seen in the most actively traded May 2016 contract.
If sustained today it suggests the spot price may weaken further when Metal Bulletin releases its daily price fixing at 10pm AEDT this evening.