To date, the 2014 iron ore price indicators are less than optimistic. Iron ore prices have fallen to a low of $89 per metric ton earlier this year, before bouncing back to $90s, but still off substantially from iron ore price highs, down more than 30% from the not so distant past.
Many factors are weighing in to contribute to this rather lackluster performance. The Asian steel industry, most prominently China’s has slowed down. China’s steel output grew only 5% over the first four months of 2014 compared to the same period in 2013. This is a significant drop from the 9% growth experienced in the first four months of 2013 compared to the first four months of 2012. At the same time, while the demand has fallen off, iron ore production has increased compounding the pricing weakness.
China’s steel market is improving, and demand is picking up
Australia is the world’s leading supplier of iron ore, followed by Brazil, with a total of 76% of the world’s iron ore supply between them. Following behind are Sweden, Canada and South Africa. In 2013, of the total global shipments of iron ore, 85.5% headed to Asian ports. China received the most, with 66.9% of total imports, followed by Japan, South Korea and Taiwan. So, a slowdown in these markets has significant impact on the movement of iron ore product. Also, with Australia as a leading supplier, and its close proximity to the Asian ports, this means shorter shipping routes, which does not contribute to the tonne-mile multipliers that drive up shipping rates.
