Iron ore cools as coking coal fires up

The price of iron ore dipped overnight, its eighth decline over the past 10 trading sessions, as coking coal takes off.

A conveyor belt loads up a barge at an iron ore transfer and storage centre operated by the Shanghai International Port Group in Shanghai in China. (Qilai Shen/Bloomberg)

The iron ore price has slipped again, as it remains under pressure from a short-term, localised interruption to industrial activity in China and broader plans to reduce a global steel glut.

Iron ore lost 0.3 per cent to $US58.60 a tonne overnight, according to The Steel Index, from $US58.80 the previous day. It has risen for only two of the past 10 trading sessions.

The price of the key export has pulled back 5.2 per cent since reaching a three-and-a-half month peak of $US61.80 last month, as some heavy industries temporarily closed to clear the air in Hangzhou for the G20 meeting.

World leaders agreed at the G20 summit to work on reducing global overcapacity in the steel industry, although some nations largely blame China for the glut, with the US already having lifted import duties on Chinese steel by 500 per cent.

Any reduction in demand for the steelmaking ingredient would be a negative for prices, which are already under pressure from a sustained — albeit slowing — increase in supply.

Many analysts expect prices to fall substantially from current levels, although their predictions have not yet materialised as hopes of Chinese infrastructure spending have boosted the commodity for much of this year.

Even mining giant BHP Billiton has suggested prices around $US60 are unsustainable and are set to dip as new supply enters the market.

“Some of that supply is late, but we have every confidence it will arrive,” BHP vice president of market analysis and economics Huw McKay told Bloomberg. “We do expect it will weigh on price from where we are, and we’ll be closer to the middle of the range that we think about, rather than at the top of the range, which is where the price is now.”

By contrast, another steelmaking ingredient, coking coal, has rallied, with prices soaring 51 per cent since the start of last month.

In London trade, BHP Billiton shares fell 0.7 per cent, while Rio Tinto shed 0.2 per cent.