Singapore — Spot iron ore prices tumbled to a nearly 12-month low Tuesday as ongoing oversupply and cheaper substitute feedstocks such as scrap brought pressure down on trade levels.
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S&P Global Platts assessed the benchmark 62% Fe Iron Ore Index at $54/dry mt CFR North China Tuesday, down $1.25/dmt on the day.
The last time the IODEX was lower was June 28, 2016, when it was assessed at $53.65/dmt CFR North China.
The front-month July IODEX swap was also down $1.50/mt at $53.4/dmt Tuesday.
A supply glut and good availability of cheaper feedstock such as scrap have been the two main depressing factors for the seaborne iron ore market lately.
"There's no real support for iron ore. There's a lot of port stocks, and many miners are also shipping out material loading in June, which will hit China in July, and the iron ore inventories are going to continue to build," a Hebei-based mill source said.
Others said that cost-conscious mills continued to rely more on cheaper ingredients such as scrap for their basic oxygen furnaces which was also denting demand for seaborne iron ore.
On top of these factors, a sharp decline in derivatives performance has contributed to iron ore market weakness.
Iron ore futures on the Dalian Commodity Exchange tumbled Tuesday, with the most liquid September contract last trading at Yuan 418.5/dmt ($61.59/dmt), down 15.5/dmt on day, and settling at Yuan 427/dmt, down Yuan 4/dmt over the same period.
Steel rebar futures on the Shanghai Futures Exchange also dived, with the most actively traded October contract last traded at Yuan 2,935/mt ($431.91/mt), down Yuan 98/mt on day, and last settled at Yuan 2,995/mt, down Yuan 35/dmt over the same period.
"A steep fall in DCE and SHFE hit market confidence on steel outlook and that decimated buying interest for seaborne iron ore today," said a source at a major state-owned enterprise in Beijing.
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