Iron ore price collapse deepens as mining industry inquiry abandoned

The cancellation of the inquiry in the mining sector was not a good news for some characters in the industry. Fortescue Metals Group Ltd., one of the biggest players in the iron ore industry at Western Australia failed to convince the government to execute the widely popular investigation in the mining business, making possible the attainment of reliable data.

Now, the plan is to get an inquiry’s endorsement from the West Australian Parliament. In that way, things are clear: Mr. Andrew Forrest really wants an inquiry for the sector. In the past days, he states that the iron ore industry is blurred and cloudy and a deep investigation from the government could help with that serious issue.

The iron ore prices keep falling and mining enterprises as BHP Billiton and Rio Tinto are being blamed because a supposed oversupply of the market in order to eliminate smaller companies in the trade. If that’s true, they are doing the appropriate actions.

This oversupply factor coupled with the severe decrease of China imports has become the financial disaster for the entire country. With iron ore prices plunging every day, investors, businessmen, and government are in complete panic. Mr. Forrest is acting in the benefit of the good ones. Or at least, it looks like that.

A massive layoff is occurring in Western Australia’s iron ore sector, where business suddenly becomes fruitless and incapable. And in the meanwhile, companies like Rio Tinto decline to make comments about it and they just limit themselves to fight against a possible inquiry to the structure of the mining industry.

After the back flip in the federal support. Mr. Forrest and Fortescue decided to change their strategy to get a wide and profound inquiry with the finality of getting reliable and trustful information that could help to reorganise the iron ore trade and fix the bearish price situation once for all.

The political blockade is making things harder for the needed recovery of the prices and following restructuring of the federal budget. Only a minor part of the political scenario is really supporting the inquiry and excuses are becoming brainless and annoying, all this while the country is facing a really bad forecast in the economic matter.

Like an odd move, the biggest iron ore supplier in the world, Rio Tinto and Vale, are constantly increasing their offer in order to improvement in volume numbers and a significant cut down in costs per ton. The China slowdown did not stop this supply trend and that seems irregular for many experts.

Paul Gait, an analyst at Sanford C. Bernstein & Co. in London said that “The majors are continuing to push the tons. (…) Clearly, that’s bad for prices, there’s no way that could be interpreted positively”. For Ivan Szpakowski, a commodities strategist at Citigroup in Hong Kong, prices will go below the US$ 40 edge.

Has been reported by UBS Group that the global surplus will expand to 151 million tons in 2018 from 34 million this year. At that growth rate, prices will suffer even more with an extreme oversupply and a constant decrease of demand. China, as the main importer of iron ore, is also the biggest producer of it. But the trend is not going to stop.

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