Seaborne iron ore prices hit a five-year low Wednesday, with the Platts 62% Fe Iron Ore Index falling 75 cents on the day to $88/dry mt CFR North China.
The last time the 62% Fe IODEX was lower was July 21, 2009, when it was assessed at $87.50/dmt CFR North China.
With end-user buying continuing to ebb as Chinese mills steered clear of spot commitment, spooked by bearish steel fundamentals and a general lack of market confidence, bids pulled back from existing offer levels, resulting in significantly lower trades.
Sources said further falls were to be expected in the longer term because the market has clearly flipped to a buyers' one.
"We've all gotten used to having very low iron ore stocks and only buying if and when we have a specific steelmaking need to fill," a Hebei-based steelmaker said. "There's no such thing as buying extra material to stock up."
The steelmaker added that another factor was the common knowledge that there was a lot of available material around, both in the seaborne and port stock markets.
Additionally, a historical low showing in iron ore futures on the Dalian Commodity Exchange Wednesday dealt a big blow to buy-side confidence, sources said.
The most actively traded January contract for DCE ore futures closed at Yuan 637/mt ($103.25/mt), down Yuan 11 from Tuesday, and settled at Yuan 642/mt, down Yuan 4.
"A lot of market players are looking at the DCE iron ore futures now because of the sheer amount of trading liquidity so it has a huge impact on sentiment," a mill source in Hunan said.
"We've all been holding back and subsisting on long-term contractual material as much as we can, but this is definitely hitting our confidence hard."