Iron ore futures continue to slide amid high inventories, increased output

Iron ore futures continued to retreat on Wednesday, amid high levels of inventories at ports even as domestic mines in China continued to ramp-up their production, analysts at SP Angel explained.

Overnight, the benchmark spot price for 62% Fe cfr iron ore at Tianjin fell from $72.0 per metric tonne on Tuesday to $68.3.

Nevertheless, analysts at Investec were optimistic that prices would stabilise, although they conceded that their estimates lay towards the top end of the analyst consensus.

Their own forecasts were for an average iron ore price of $76.0 per tonne in 2017 and $67.5 in 2018.

"In our view, closure of outdated and polluting capacity should increase China’s dependency on high quality seaborne product – hence we have been more bullish than consensus in the near to medium term. Chinese steelmakers are now highly focused on improved profitability, but also need to ensure stability in blast furnaces in order to operate at high throughput."