The price of iron ore is set to fall below 40 U.S. dollars per tonne this week as stockpiles have reached their highest in seven months, Australia and New Zealand Banking Group Ltd (ANZ) said on Monday.
Iron ore prices have slumped over the past year as China's demand falls while inventories and low cost production increases from the world's biggest suppliers BHP Billiton, Rio Tinto and Brazil's Vale, falling 30 percent since mid October.
More ore is on the way into Asian markets this week as Gina Rinehart's crown jewel, Roy Hill, makes its inaugural shipment from Australia's Pilbara region after suffering a delay last week. "A strong build in inventories and weak steel markets continue to weigh on the iron ore market," ANZ said in a statement.
"With miners having ample cargo to sell, the prospect of sub-40 U.S. dollar a ton prices this week looks likely."
The spot price for 62 percent fines to Qingdao fell by a further 1.77 percent on Friday to 40.03 U.S. dollars per ton, on news stockpiling had expanded by 2.1 percent to 89.50 million tons last week.
Meanwhile the benchmark iron ore to Tianjin reached a fresh 10- year low to 39.40 U.S dollars per tonne on Friday's overnight session, down 2.3 percent from its prior close of 40.30 U.S. dollars per tonne.
China's steel production fell in November while the China Metallurgical Industry Planning and Research Institute predicts steel production will decrease 3.1 percent to 781 million tonnes in 2016 which will see demand for the commodity declining by 4.2 percent, according to a report released on Monday.
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