Iron ore prices plummet, domestic less steeply than imported

In June this year, global iron ore prices averaged a 10-year high $214 per tonne, having risen a whopping 60% in a span of six months from the end-2020 level.

Three months on, with China cutting its steel output and issuing stricter production cuts, the prices have corrected sharply to $125 per tonne as of October first week.

And there is more bad news for iron ore producers. The current run rate shows China had already produced 68-70% of its 2020 steel output by August, portending a slower pace of production and, hence, lower demand for ironore, through the remainder of the year.

Indeed, despite the tight market resulting from supply disruptions in Brazil (accounting for 20% Chinese imports), iron ore prices are expected to average $150-165 per tonne in 2021 because of tepid demand from China for the rest of the year and souring of its trade relations with Canberra (accounting for 60% Chinese imports).