LAUNCESTON, Australia, Nov 27 (Reuters) – The 15 percent plunge in iron ore prices in the past week certainly looks dramatic, but is more a case of the raw material finally catching up to a more established trend of weakness in Chinese steel prices.
However, the drop in iron ore is more than just a cause for concern for miners in Australia, Brazil and South Africa, as it may alter the dynamics of what quality of ore Chinese mills prefer. The spot price of ore with 62 percent iron content MT-IO-QIN62=ARG, as assessed by Argus Media, dropped to $64.60 a tonne on Monday, down 6.9 percent from its previous close.
Since its recent peak of $77.80 a tonne on Nov. 9, it has shed 17 percent, a relatively steep decline in a short time period. Shanghai steel rebar futures have dropped by more than iron ore, but over a longer time span.
The contract fell as low as 3,496 yuan ($503.75) a tonne during Monday’s trade, formally putting Chinese steel in a bear market, having slumped 21 percent from the seven-year high of 4,418 yuan on Aug. 22.
Steel rebar has been in a downward trend since the August high, while at the same time iron ore prices were actually still gaining, at least until about a week ago. Iron ore futures on the Dalian Commodity Exchange rose 12.4 percent from Sept. 29 to their recent peak of 540.5 yuan a tonne on Oct. 29.