Spot iron ore prices extended losses on Monday, after China's No. 3 steelmaker, Wuhan, said global miners BHP Billiton, Rio Tinto and Vale were capable of setting prices arbitrarily, and port stocks in the top consumer held near historic highs.
Indian ore with 63.5 percent iron content was quoted in China at $182-$184 a tonne, including freight, on Monday, down from $183-$185 on Friday, said Chinese consultancy Mysteel.
"The cost of extracting 1 tonne of iron ore is $20, delivery costs are $56 and it is selling for $180-$190 -- this is a monopoly in the true sense of the word," said Wuhan Iron and Steel president Deng Qilin said on Saturday at a news conference on the sidelines of the National People's Congress in Beijing.
Traders were now asking whether inventories holding near historic highs and China's criticism of high prices could keep prices on their downward trend or whether the market was nearing a bottom.
"The Chinese are a little bit put out about the power they think the miners have. They feel they have to accept the quarterly prices based on the indexes," said an iron ore derivatives trader.
"But if they wanted to, they could get into these derivatives and take advantage of price anomalies in their favour. We are waiting for more physical direction right now. The mills are hanging back and can see further scope for falls."
Iron ore prices may soon bottom out, the trader said, a view echoed by Troy Flannery, senior resource analyst at DJ Carmichael.
"I don't see prices coming off too much. The guys at BHP are very bullish and given their size, they have lot of people doing analysis and so they and Rio are going hard to produce all they can."
Flannery said rainy weather in Western Australia had disrupted some shipments and risks to transportation would persist for a little longer until the cyclone season passed. (Reuters)
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