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Why Iron Ore Prices Took a Nosedive


Jul. 16 2015, Published 3:55 p.m. ET

Iron ore price under pressure

Iron ore prices came under renewed pressure for the week ending July 10. On July 8, iron ore prices tumbled to $47 per ton, which is close to a decade-low value. Since June 29, prices have slumped by 27% from $62 per ton to $47 per ton on July 8. After that, prices have recovered by 6%, but still remain quite weak.

The volatility in the Chinese equity markets impacted commodities, including iron ore. China is the single largest consumer of commodities, and any weakness in the country is met with a strong reaction in the commodity space. The chart below shows the trend in iron ore prices, which rebounded strongly from April’s decade-low levels, only to slump again.

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Series overview

In this series, we’ll discuss the reasons why iron ore prices fell after a strong rebound. We’ll discuss the recent data releases on the supply side, including June’s iron ore exports from Australia and Brazil. We’ll also look at demand indicators from China such as steel production in China and its factory activity in June.

These numbers impact iron ore prices, as well as iron ore companies’ revenue, margins, and stock prices. These companies include BHP Billiton (BHP) (BLT), Rio Tinto (RIO), Vale (VALE), and Cliffs Natural Resources (CLF). Cliffs Natural Resources forms 2.9% of the SPDR S&P Metals and Mining ETF (XME). This will help investors understand the direction that iron ore prices may take.


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