Iron Ore Price Update

As we suggested in a recent post on BHP Billiton Limited [ASX:BHP], iron ore prices were set to fall.

Well, it looks like that has now happened.

The price for benchmark 62% fines dropped 1.3% to $75.71 yesterday — its first dip in almost two weeks.

As you can see below, it has been steadily rising in price since August:

Iron Ore Price


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What’s driving iron ore prices lower?

There are a couple factors — foremost amongst these is a drop in demand for steel in China.

These include rebar and hot rolled coil futures which have fallen to their lowest levels in a week and since early July respectively.

Additional factor also includes the release of official PMI data which shows that activity in China’s manufacturing sector has improved at its slowest pace in over two years.

Finally, the industry heavy Hebei province in China has issued an ‘orange’ smog alert for the second time in two weeks.

Tangshan, China’s largest steel producing centre, also issued an ‘orange’ alert.

This could affect iron ore prices according to Reuters:

Under an orange alert, the second-highest warning behind red in China’s four-tier system, steel mills must halve their output.

Can iron ore continue its bull run?

It remains to be seen whether this is a one-off dip or a sign that iron ore’s bull run is coming to an end.

Factors to consider could be as fickle as the weather patterns in China’s steel producing districts.

However, there has been little extra news about a planned stimulus package, which could drive prices upwards again.

One scenario that could play out is another strong dip in the Chinese stock market which see prices fall off for a short period, followed by further announcements with regards to the stimulus package.


Lachlann Tierney,
For Markets & Money

PS: Think you know mining stocks? The 10 stocks that our resource expert Jason Stevenson picks out in our free report might surprise you. It’s available here.

Lachlann Tierney is a writer for Markets & Money. He has lived and studied in the US, the UK, and Australia. With an MSc from London School of Economics (LSE) he brings a strong grasp of geopolitics and world affairs to his analysis. Lachlann is always on the lookout for the news that will give you an edge in tomorrow’s markets.

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