Iron ore remains largely quiet as China celebrates Tomb Sweeping Festival

Iron ore (7) — A processing plant can be seen at the Fortescue Metals Group (FMG) Christmas Creek iron ore mine located south of Port Hedland in the Pilbara region of Western Australia, November 17, 2015. Reuters/Jim Regan

Not much action was seen in the iron ore spot market on Tuesday as China celebrated the Tomb Sweeping Festival holiday. While there was marginal betterment on Tuesday, the prices continue to trend below $80 a tonne.

This is the lowest the prices have dipped since early January. As noted by Metal Bulletin, the spot price for benchmark 62 percent fines increased by a slight margin of 0.11 percent to reach US$79.45 a tonne. This comes in contrast with three sessions of consecutive losses.

In 2017, Australia’s top export has upped 0.6 percent. More than a month ago, the same number stood at 20 percent. Higher or lower grade ores did not record any change in their prices.

A few analysts say the ongoing decline in prices stems from rising inventory at the ports in China. At present, the volume of stockpile in Chinese ports is the highest since 2004. While Australia shares strong trade relationship with China, Chinese ports reportedly have enough iron ore to construct as many as 13,000 Eiffel Towers.

Although China enhanced its domestic output last year on the back of increase in prices, stockpiles are mounting at its ports. As a result, the level of stock has greatly increased in more than a decade. This is expected to lower the value of the commodity.

However, Stan Wholley, president for the Americas at CSA Global, believes that the ongoing declines cannot be taken to mean the start of a new slump. “If we go back nine or eight months, iron ore was in the $40s and everyone was saying there was no reason to see a recovery, and that it would probably stay in the range of $40 to $60 for the next two to three years,” Wholley said, speaking with Mining.com, last month.

“Those pundits were shown to be very wrong (…) If you look at current prices in context, you’ll see all of the majors are making incredibly good margins at the moment and even small or mid-tier iron producers are making money at current prices,” he said.

He further emphasised that prices may not climb to the maximums witnessed between 2008 and 2012. Nevertheless, if they continue to hold between US$60 a tonne and US$90 a tonne, majority of the producers will be able to do well in their businesses. Market activity will resume on Wednesday following the four-day break.