by Chris Becker

Continued bad news if you’ve accidentally tied your company or indeed, your economy, to an iron ore price above $80USD per tonne.

First, the complex price update, with spot falling over 2%, below $80, back to September 2009 price levels:

The spot iron ore and 12 m swap chart tells the story does it not – now down over 40% for the year (including in AUD, pity we didn’t manage that a bit better isn’t it Captain Glenn?)

Rebar is plumbing new lows:

The rationale for the continued falls? The Chinese economy is restructuring and is not punting on round robin style stimulus packages to goose already inflated and speculative markets in commodities and real estate (but I repeat myself).

This realisation is settling in, at least by traders in iron ore and associated metals, and finally it seems in the share prices of iron ore miners, although I’m sure there’s still some amateurs holding on as the smart money moves aside.

Again, the problem of increased supply is meeting peak demand – from The AFR:

“Iron ore is going to continue to be under pressure, unless we see the Chinese government come out with a fresh stimulus package, which would benefit the housing market,” Australia and New Zealand Banking Group senior commodity analyst Daniel Hynes said on Tuesday.

“That’s where the focus has been and they’ve continued to keep credit conditions tight in that sector, demand has been subdued, and as a consequence steel producers have been reluctant to restock any of their iron ore inventory in light of that fragile outlook”….

China’s steel industry, meanwhile, is close to peak production. China Iron and Steel Association deputy secretary general Li Xinchuang on Monday said steel production had risen above 800 million tonnes in 2014 but that growth rates are slowing…

“The China market is not as good as before,” Mr Xinchuang said. “It [iron ore] will be roughly around $US80 per tonne for a long time because the volumes [of imports] increase very fast,” he said.

$USD80 per tonne for a long time will not help the local stock market – BHP and RIO were down over 3% each in overnight trade, and beleaguered Fortescue (down nearly 7% intraday yesterday, closing just under 5%) will be smashed come the open.

Watch this space. Its going to be an awesome ride.

Iron ore daily update ($80 floor gone)