Seaborne iron ore prices slumped again on Thursday. Chinese steelmakers are cutting production under pressure from inventory and prices.

The Kallanish KORE 62% Fe index slumped $4.46/t to $84.84/dry metric tonne cfr Qingdao, the lowest level since 10 February. On the Dalian Commodity Exchange May iron ore settled down CNY 20.5/t at CNY 636/t ($90.57/t), the lowest level since 17 February. On the Singapore Exchange, meanwhile, March 62% Fe futures settled down $2.3/t at $83.61/t. In Tangshan, billet prices dropped CNY 20/t to CNY 3,060/t.

Chinese steel futures prices are now being forced down amid rising inventories (see separate article). Steel mills are being pressured to reduce output in order to prevent steel inventories at mills exceeding storage capacity. In addition, lower steel prices are pushing more mills below breakeven, and so many are preparing to shortly bank blast furnaces.

In recent weeks, iron ore has been sustained by lower port stocks and disrupted deliveries from Brazil and Australia. With supply now expected to build steadily over the coming weeks, and with Chinese iron ore consumers shutting capacity, port stocks are expected to increase steadily and further pressure prices. This will leave the market in a new phase where iron ore port stocks increase and prices decrease until China’s massive steel inventories can be cleared.