No clear end in sight for iron ore collapse as futures hit $US90

The relentless pace of iron ore’s collapse has strategists at a loss as to when producers might see a reprieve, as prices extended their fall below $US100 a tonne on Monday, inflicting further pain on the major miners and the national accounts.

Futures in Singapore hit a low of $US90 a tonne upon their return to trading for the October contract, tumbling 11.5 per cent from where they closed on Friday. The spot price dropped 4.9 per cent to $US101.95 a tonne, according to Fastmarkets MB, taking the commodity’s weekly loss to 21.4 per cent.

Longer-dated contracts were spared the carnage witnessed in the short-term market. March 2022 futures fell 1.6 per cent to $US96 a tonne on the SGX.

The swift fall in value by Australia’s number one export is poised to dent the nation’s fiscal position, with every $US10 decline in iron ore’s price equating to $6.5 billion in nominal GDP terms, according to Commonwealth Bank estimates. The Australian sharemarket was down 2.1 per cent by the early afternoon as BHP Group fell 4.5 per cent to $37.38, and Rio Tinto 4.6 per cent to $94.22. Fortescue declined 4.9 per cent to $14.52.

While accelerating steel production cuts in China were an initial trigger for the bulk commodity’s retreat from lofty levels, the momentum driving prices and stocks lower has intensified as panic sets in.

“The big issue now is confidence, so it’s very hard to know when the market might start to try and stabilise,” said co-head of mining research at UBS, Lachlan Shaw. “It’s fallen a long way, but I think the market wants and needs some certainty in terms of how, or if, the government intervenes in the unfolding Evergrande situation.”

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