Iron Ore Prices Neared Decade Low, Hinting at More Weakness Ahead



Iron ore prices near 10-year lows

Iron ore prices came under renewed pressure starting in the middle of October 2015. The prices fell by 14%, taking the total fall in iron ore prices to date to over 30%.

The recent plunge is mainly due to a worsening demand outlook, especially from China. The recent data points coming out of China show the growth recovery seems distant despite the government’s efforts.

China is the single largest consumer of commodities (COMT), and any weakness in the country is met with a strong reaction in the commodity space. The chart above shows the trend in iron ore prices, which rebounded from July’s decade-low value of $44.10 per ton. On November 17, iron ore prices plunged to $45.60 per ton.

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Series overview

In this series, we’ll discuss the reasons that iron ore prices fell after a strong rebound. We’ll discuss the recent data releases on the supply side, including October’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 October. We’ll also analyze how these indicators could shape up going forward.

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 3.7% 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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