Rolling front-month futures show the steady decline in iron ore prices since the contract was launched in October 2013 at almost 1,000 yuan a tonne, dropping to a low just shy of 300 yuan in December inside a trend channel. Pressure from planned cuts in steel capacity, the five-year plan for mergers in the metal sector and demand for metals at a three-year low are all important contributing factors. But subdued price action and lower volatility since November, coupled with the market holding above the record low, hint that an interim rounded base might be forming. Hedgers have been reducing positions and iron ore inventories are at their lowest in 37 weeks, supporting this view.
