Subscribe

Why iron ore prices are in the pits

Why iron ore prices are in the pits. Part 1

High-cost producers, particularly in China, are not helping the perilous state of the iron ore market by refusing to restrict supply, according to ANZ’s head of commodity research.

"One of the dynamics creating weak prices right now is that high-cost producers in the market are not responding in the way of restricted supply."
Mark Pervan, Head of Commodity Research, ANZ

Speaking to BlueNotes on video, ANZ’s head of commodity research, Mark Pervan, said the vertical integration model of some Chinese miners, which also own steel plants, is forcing the issue. 

“One of the dynamics creating weak prices right now is that high-cost producers in the market are not responding in the way of restricted supply,” he said. “And I’m talking about China supply here.” 

“And this is… why we’ve seen an underperformance in iron ore. The high-cost producers are staying open.” 

Globally, iron ore prices are currently at six-year lows. The price of the base metal, used for a range of functions but primarily in steelmaking, has fallen 40 per cent so far in 2014. Despite this softness, producers continue to maintain output at high levels. 

So, what are the other factors at play here? How will it affect the market in the long term? Watch the videos to find out more.

Why iron ore prices are in the pits. Part 2

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

editor's picks

16 Oct 2014

Hard slog ahead for the global economy

Warren Hogan | Former Chief Economist, ANZ

ANZ chief economist Warren Hogan has warned there is more hard work ahead for the global economy in the short to medium term with further challenges likely to moderate the pace of growth.

06 Oct 2014

Job ads rise for fourth month

Warren Hogan | Former Chief Economist, ANZ

Employment growth in Australia registered its fourth consecutive monthly rise in September with job ads increasing 0.9 per cent, according to the ANZ job advertisements series.

01 Oct 2014

Cool for cats? A new dawn in the land of the rising sun

Tim Harcourt | Author, The Airport Economist

Are there really jazz festivals for pets in northern Japan? And how are demographics and changing gender roles affecting Japan’s economy and society? The Airport Economist explores modern Japan for himself in this excerpt from his new book, Trading Places.

03 Oct 2014

Why NSW is #1

ANZ Research |

If Australian policymakers had their way, there would be a smooth transition to non-mining sources of growth as the mining construction boom fades.