Iron ore was sold heavily on the Dalian exchange yesterday as the fallout from Andrew Forrest’s failed attempt to gain support to reduce production and push prices higher continued.
That might seem harsh but what Forrest did, and what the rebuke from competitors reinforced, was to signal to the world’s iron ore traders that there is little to stop the price fall at the moment other than the formation of a cartel.
So the selling has accelerated.
Our favoured contract – the one we watch each day at the moment – is for June 2015. It slipped $1.70 to $49.76 a tonne. But the really big news is that almost the entire futures curve, out to 2017, is now below $50 a tonne. That’s the lowest pricing in over a decade.
Yesterday the share price of producers such as Fortescue Metals and BC Iron rallied. Perhaps that was on the news that China’s steel intensive construction sector had received a sugar hit from policy makers who had eased housing tax and lending rules to fight the economic downturn.
But as any trader knows, price moves can take on a life of their own.
The question now is how low will iron ore go?