Seaborne iron ore prices hit a historic low Tuesday, with the IODEX index hitting $39.30/dry mt CFR North China on the bearish situation in the Chinese steel industry, sources said, adding that they expect ore to stay below $40/dmt in the short term.
Platts assessed the 62% Fe Iron Ore Index, or IODEX, at $39.30/dmt CFR North China, down $0.20/dmt on the day, after being below $40/dmt for the past three sessions.
Since the start of the year, IODEX has fallen $32.45/dmt, or 45.2%, and Tuesday's assessment represents the lowest since Platts started assessing the index in June 2008.
Continuous steel production cuts have curbed end-users' buying appetite, especially for seaborne cargoes.
To mitigate price risk in a falling market, most steelmakers prefer to buy port stocks hand to mouth instead.
Surging port stocks are providing plentiful choices for mills. Quayside volumes of iron ore at major ports in China were 90.68 million mt Tuesday, up around 10 million mt from early September.
Tight bank credit for the steel industry has also dampened demand for iron ore.
A Beijing-based trader said it was taking longer for some mills to open letters of credit or the banks were requiring a higher percentage of the cargo value as a deposit.
The usual winter slowdown in construction has resulted in end-users having difficulties obtaining downstream orders. Mills have to cut their steel prices to offload inventory and maintain cash flow.
The physical steel square billet price in Tangshan, a barometer of steel fundamentals in the key production hub of the country, fell to Yuan 1,470/mt ($229.41/mt) Tuesday. This is only Yuan 10 above the 10-year low and down 31.9% from January 2.
China's large and medium-sized steel mills suffered an accumulative loss of Yuan 72 billion in January-October, according to China Iron and Steel Association (CISA).
Additionally, the losses are causing many mills to consider production cuts. Market participants say a rebound in the steel market is unlikely in winter.
As a result, many steelmakers were also heard to be offering their own contractual iron ore volumes on a spot basis, further adding to the glut in the seaborne market.
