Iron ore prices have dropped to a 10-month low as China made further calls to slow steel production, causing major and minor iron ore miners to feel the effects in Australia.
From record highs in May of $US230 ($315) per tonne, down to current levels of $US106 per tonne, 62 per cent Fe iron ore prices have taken a toll, and UBS only expects them to decrease from here.
“Iron ore and met-coal prices have been volatile over the last three months; weaker steel production in China has driven a sharp fall in iron ore prices (down 45 per cent since end of June) while supply disruption and the continued embargo of Australian coal into China has driven a sharp increase in met-coal prices,” UBS stated.
UBS expects the price of iron ore to average $US86 per tonne in 2022, while the industry consensus sits around $US132 per tonne.
In BHP’s economic and commodity outlook from mid-August, the major didn’t predict iron ore to suffer too much further and recognised the current state of play in comparison to years gone by.
“The increasing likelihood of stern cuts to steel output in China in the current half year, as affirmed by China’s peak industry body in early August, is testing the bullish resolve of the futures markets,” BHP stated.
“Prices have decreased materially in late July and early August, but they remain extremely high relative to history at around $US160 per tonne at the time of writing.”
The effects on smaller enterprises was epitomised by Venture Minerals this September, as it was forced to suspend operations at its Riley iron ore mine in Tasmania, citing a lack of cost efficiency.
Congestion in Chinese ports has also caused shipping rates to triple, in a further setback for companies such as Venture – which had just sent its first load of 45,632 tonnes of iron ore off to Chinese offtake partners
Venture Minerals managing director Andrew Radonjic said the company only wanted to repay the Tasmanian community and Government for allowing it to attempt operations.
“Our inaugural shipment marks a significant milestone for Venture Minerals and is the culmination of considerable efforts by all stakeholders to successfully establish a resource base, secure environmental and transportation approvals, processing plant construction, commencement of mining and ore hauling, and now first commercial iron ore shipment,” Radonjic said.
On the mine suspension, Venture stated it hoped the obstacles to cost-effective iron ore production would not be long-term.
“Although the company believes that some of the external pressures in the market will likely only be temporary, Venture believes the best course of action is to temporarily suspend mining operations to preserve the reserve base while the company works through potential cost efficiencies and assesses the broader market volatility,” the company stated.
Venture’s main offtake partner is Prosperity Steel – one of the largest iron ore traders in the world – and the miner will receive around $5.1 million once the first shipment has been delivered.
In May, Venture took advantage of the strong iron ore prices with the commissioning of a wet screening plant.
“The recent record iron ore price makes it a perfect time for the company to transform from explorer to producer,” Radonjic said.