On Monday, iron ore prices fell below $80 a tonne, reaching the lowest level in five years. Benchmark iron ore fell by 2.3% to $79.8 a tonne, taking its loss in 2014 to as much as 40%, according to a Financial Times report.
The main culprit is slowing steel output. Data released on Monday by the World Steel Association shows crude steel production rose by just 1.4% in August, compared with a year ago, with China’s output growth underperforming at a mere 1%. Growth is lower than July’s levels, too. Among the few regions that did relatively better were North America, Africa and the Middle East.
The European Union region’s output was flat, Ukraine pulled down the Commonwealth of Independent States into negative territory, and South America’s steel output declined by a bit. There was one silver lining on the home front, as India’s output grew by 5.2% and also rose sequentially. If that spurt sustains, that should be a good sign for Indian steel companies.
But the global worry will continue, especially as China is not worried about its declining industrial growth, keeping up the pressure on prices. Global steel capacity utilization fell by 1.4 percentage points over a year ago to 74.2%, and also slipped by 1.2 percentage points sequentially. Lower steel production translates to lower demand for steel-making materials such as iron ore and coking coal. The manner in which iron ore prices have fallen in September suggests that little has changed since August, and if anything, may have worsened a bit.
Source: Live Mint