The price of iron ore has dropped about 40% since mid-July due to concerns over demand from China, which produces more than half of the world's steel. In recent months, China has been systematically reducing steel production, producing 86.79 million tons of alloy in July, which is 8.4% less than in July 2020.
Despite the fact that China has begun to severely reduce steel production, there is still an increase in January-July, which contradicts Beijing's plans to reduce the annual output of metal products this year. This means that the decline in production should increase and apparently already happened in August.
The downturn has hit iron ore-producing countries, particularly Australia and Brazil, which have recently embarked on a fragile economic recovery following outbreaks of the most contagious variant of the coronavirus.
According to S&P Global Platts, which publishes daily prices, the benchmark ore price fell to $ 130.20 per ton on Thursday after a one-day fall of 15% to its lowest level since November 2020. The commodity, which hit a record high above $ 233 per tonne in May, rose slightly to $ 139.10 per tonne on Friday.
Other commodities, including oil and copper, are falling amid fears that rising Covid-19 cases could hamper the global recovery. According to Morgan Stanley, iron ore prices have not fallen as quickly since spot prices were set about 13 years ago.
The American edition of The Wall Street Journal said that the current fall in prices came as a surprise to the stock market, which was caught "off guard after spring's run to record highs."
Prices for cargoes of iron ore with an iron content of 63.5% delivered to the Chinese port of Tianjin in the second half of August fell below $ 150 per tonne, the lowest level since December, amid falling demand, rising inventories and limited steel production in China. Iron ore stocks at 45 Chinese ports increased by 260,000 tons to 127 million tons as of the second week of August, according to consultancy Mysteel.