Iron ore price falls to 5-year minimum

Iron ore prices are falling back to minimum levels of of five years ago– yesterday a ton of raw material cost $71 in the port of China. Russian companies are mostly benefiting from this for now, despite a decrease in income in the commodity segments.

Yesterday, spot prices of iron ore with delivery in China fell immediately by 5%, to $71 per ton. This is a record low level since the minimum level of June 2009, analysts of BCS reported in their survey. From the beginning of the year, the ore price has fallen by half. Experts and metallurgists agree that the main problem is "the skewed balance of supply and demand", the emergence of new production projects and slower growth of the ore consumption in China. China, which produces about 650 million tons of cast iron per year, uses more than 1 billion tons of ore, up to 75% of which it imports, this is more than a half of the global consumption, explains Oleg Petropavlovskiy of BCS. "Although China consumes and will consume large amounts of ore, the future balance of supply and demand on the world market doesn’t imply high prices," – the general director of Metalloinvest, Andrei Varichev reported to the Kommersant. And the owner and general director of Severstal, Alexiy Mordashov noted during the conversation with the Kommersant on November 10th that the fall in prices was also caused by the decrease in global pace of the steel consumption growth: "This is not 4-6% per year any more, but only 2-2.5%, and as for China – it doesn’t show even 1% of the growth".