Prices for a cargo of iron ore with an iron content of 63.5% delivered to the Chinese port of Tianjin fell to $96.5 per tonne in the second week of October, the lowest in nearly 11 months.
The culprit for the new downturn is the looming threat of new quarantine measures in major Chinese cities, which kept the demand for industrial resources at a low level.
The number of newly diagnosed coronavirus cases in China rose to its highest level since August since Golden Week, prompting major cities to mandate mandatory testing of the population and increased the likelihood of strict restrictions being imposed, while fading hopes that Beijing could relax their zero Covid policy.
The nervousness of the new lockdown exacerbated a deteriorating macroeconomic environment as the country's main real estate sector slumped and manufacturing PMIs pointed to continued contraction. Worries about low demand more than offset the developments that positively impacted supply.
Iron ore is expected to trade at $94.74/t by the end of this quarter. Looking ahead, we estimate that in 12 months it will cost no more than $85 per dry ton.