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Iron Ore Prices Are in a Bear Market: What’s Next?

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Iron Ore Prices Are in a Bear Market: What’s Next? PART 1 OF 10

Iron Ore Prices Are in a Bear Market: What’s Next?

Iron ore prices in bearish territory

Iron ore prices have been on a roller coaster ride in 2017. Prices peaked at $95 per ton in February 2017. After that, they fell to $53 per ton in June 2017. Shortly afterward, they started recovering, and July and August saw a significant rise in prices. However, the prices have again started a downward trend with a 20% fall registered over the past three weeks or so. For the week ended September 22, 2017, the prices retreated 12%, posting their biggest weekly loss in the last 16 months. Iron ore prices are currently around $64 per ton. The most recent fall in the steel-making ingredient was due to expectations of a fall in Chinese steel demand as authorities tighten credit conditions.

Iron Ore Prices Are in a Bear Market: What’s Next?

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Capacity cuts and iron ore prices

In addition, as steel capacity cuts planned for Chinese mills in winter months are approaching, the outlook for iron ore demand is looking bleaker. The steel mills in many key steel-producing cities in China are expected to run at substantially lower utilization rates from November 15, 2017, to March 15, 2017, which will lead to a significant decline in steel production and consequently the demand for iron ore.

Iron ore miners (XME) such as BHP (BHP), Vale (VALE), Rio Tinto (RIO), and Cleveland-Cliffs (CLF) are getting battered after the recent precipitous fall in iron ore prices.

Iron ore price outlook

After the latest decline, investors are left wondering if this is part of a larger declining trend or a steeper correction before iron ore prices rebound. We’ll try to find out answers to these questions as we explore the forward-looking and co-incident indicators for iron ore in this series.

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