 "Iron ore prices see worst fall since financial crisis of 2008")
The prices declined as much as $6 per tonne in Monday's trade, a biggest-ever single day decline in recent years, analysts said.
The spot iron ore prices slumped to $110 per tonne on CFR (cost and freight) basis in China compared to $118-120 per tonne about a week ago and $125 per tonne in January this year. Between February 17 and March the spot prices have declined by $10 per tonne.
"The bearish sentiment prevailing in the market along with tight capital issues and increasing supply from the Australian major miners had been putting pressure on the iron ore prices for some time now. Monday's fall in the Tangshan billet prices by RMB 30 per tonne and the sharp fall in the futures and swaps markets dented the sentiments further," said Prakash Duvvuri, head of research at OreTeam Research, the Delhi-based iron ore research firm.
There was no transaction on Tuesday as the buyers stayed away from the market due to weak sentiment.
Capital was a big issue for steel mills and this had led to certain mills violating the long-term contractual cargoes. The mills were either buying directly from ports or re-selling the cargoes to make some returns and in the process trying to avoid raw material stocking up at their plants, he said.
"This downtrend is because of the signs of weakening demand for steel in China following the release of trade data that showed an unexpected decline in exports. Furthermore, country's slowing economy has reduced the demand for steel, which again has an incremental impact on the steel and iron ore stockpiles," he said.
As a result, the prices for Indian iron ore also fell to $95.5 per tonne for 63.5/63 per cent Fe fines on FOB basis at Vizag. This is the biggest fall ever recorded in a day's trading, Duvvuri said.
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The lowest levels in the past 5-6 years for this grade were $83 per tonne in September 2012. Between January 1 and March 10, 2014, the spot iron ore prices have fallen by $20 per tonne.
China's iron ore imports in February were at 63.16 million tonnes as compared to 86.83 million tonnes in January. Being a shorter month and due to high port inventories, February managed lower imports and now going into mid-March, there is a possibility that the lower imports may help in consolidating some of the lost ground in spot iron ore prices. China's total iron ore imports in 2014 are close to 150 million tonnes in two months.
Currently, about 108 million tonnes iron ore is stocked at Chinese ports. This means that the interest in the sea-borne cargoes would be lower. With this sort of inventory, the buying interest may not pick despite falling prices mainly marred by the liquidity situation, Duvvuri added.
The Indian exporters of iron ore are set to witness tough period ahead if the current price situation in China prevails for some more days. As it is, India's iron ore exports for the first 11 months of the current year have declined by 25 per cent to 14 million tonnes compared to last year. Going forward, the immediate impact of the current price levels will be on Goa's auctions. The traders may not show much interest at auctions in Goa if the same level of prices continues, Duvvuri said.
He, however, feels this could be the bottom end and at the most the prices might go down by $2-3 per tonne this week. There is a rebound possible towards the end of this week, he added.