The price of iron ore is flirting with the $US50 mark with a near two-week-long red streak showing no sign of ending, as BHP Billiton warns high-cost producers have been slow to trim production.
At the end of the latest session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US51.40 a tonne, down 1 per cent from $US51.90 a tonne in the prior session.
The commodity has lost around 10 per cent during an eight-session run of losses, bringing it to its lowest mark since the end of July.
The weakness of late has been pegged to soft Chinese economic data and comments from industry giant Baosteel that warned Chinese steel production could slump as much as 20 per cent in the years ahead.
“If we extrapolate the previous experience in Europe, the United States, Japan, their steel sectors have all gone through painful restructuring in the past, with steel output all contracting by about 20 per cent,” Baosteel chairman Xu Lejiang said on Wednesday.
“China will eventually get there as well, regardless how long it takes.”
The comments were seen as very bearish for iron ore, a key steelmaking component.
The depressed outlook was not helped overnight as mining giant BHP said high-cost rivals had failed to respond to market forces as quickly as it expected, ensuring a higher risk of a glut in the near-term.
“It would be great if the top part of the cost curve, because we’re not part of it, moved more quickly rather than hope they could survive forever,” BHP boss Andrew Mackenzie said at the company’s AGM in London.
“It would be wonderful if there was more instant reaction, but we know people aim to survive.”
Source: http://www.theaustralian.com.au/