Chinese Iron Ore Prices Impacted by Excess Supply

Spot iron ore prices in China have been in a state of fluctuation having come down from $122.60/dmt at the beginning of the year to the current level of $111.80/dmt on 62% Fe.  The economic slow down in China and the over abundance of ore inventories in China coupled with banks cracking down on iron ore as a source of collateral has pressured prices.

The Bureau of Resource and Energy Economics (BREE), Australia’s Resource Forecaster, joined the ranks of Standard Chartered and Goldman Sachs Group Inc. by forecasting lower prices for iron ore in their March quarterly.  They expect spot prices to average around $110 per ton this year, a 7.5% decrease from the $119 per ton in the previous forecast.  This is a 30% drop in price from 2013’s average. They expect spot prices to average $110 per metric ton FOB Port of export for this calendar year.