Key iron ore data shows prices set to fall further, says UN agency

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Newly mined iron-ore in Liberia. UN File Photo/B Wolff

Falling global demand for iron ore and steel – particularly from China – has resulted in slower growth, lower prices and squeezed margins for the key industrial sector, UN trade experts said Wednesday.

Latest data from the UN agency for trade and development, UNCTAD, shows that China's economic slowdown has led to a glut in supply from mining companies.

This drop in demand had the effect of bringing prices down to levels not seen since 2002.

Daniel Johnson has more.

When the Chinese economy sneezes, so does the rest of the world; that's the message from UNCTAD, the UN's trade and development agency.

In its latest look at global iron ore and steel production, UNCTAD says that there's plenty of evidence to show that falling demand in China was not offset by an uptick elsewhere in the global economy.

That's important, because the iron ore trade serves as a key indicator on the health of the global economy, as it's turned into steel and then used to build cars, bridges and skyscrapers.

Here's UNCTAD's Samuel Gayi:

"Industrialisation and manufacturing is quite steel intensive, so a reduction in that process is reflected in lower demand for iron ore as well…so if you like it's more or less an indicative measure for where the world is going in terms of industrialisation in manufacturing activities."

The extent of the fall in demand in China is clear from the UNCTAD report, which shows that despite a slight increase in world iron ore production in 2014 – to 2,048 million tonnes – a closer look shows that China saw a whopping 27 per cent drop in production.

Prices for iron ore also plunged to levels not seen since 2002, falling nearly 40 per cent in the space of a year.

Daniel Johnson, United Nations, Geneva

Duration: 1’13"

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