It is reported that Chinese steelmakers have defaulted supply contracts or have deferred taking shipment of iron ore this month, due to a rapid decline in prices.
A trader of iron ore in Singapore said there are about 3 to 4 million tons of iron ore so far this month in terms of defaults and deferrals.
The bulk of that contracted volume has found its way into spot market, adding pressure to iron ore prices that have slumped 23% this year.
Steelmakers locked by long term purchase contracts can be tempted to default on those agreements when the spot or noncontract price of iron ore falls below their contracted prices.
This fact just explains why the miners are having so many spot tenders on a daily basis, a trader in Hong Kong said.
High grade 62% ore fell 2.7% this Tuesday which is its weakest since 2009.
An industry official who works at a midsize steel mill in China said they have to cut shipments from miners this year and mainly purchased domestic iron ore in the first half since the prices are falling so rapidly