Iron ore in free fall as port holdings expand

Iron ore’s in free fall. Prices dipped as port stockpiles in China expanded to the highest level in more than a year following moves by local authorities to quell frenzied speculation in raw-material futures.

Ore with 62% content delivered to Qingdao tumbled 5.7% to $54.99 a dry metric tonne, according to Metal Bulletin. Prices have slumped 22% since peaking at more than $70 on April 21, and Monday’s drop follows a 12% loss last week.

Miners’ shares fell, with Rio Tinto Group losing 5.2% in London. Iron ore is falling back to earth after a dramatic surge of speculation in China had helped to hoist benchmark prices to the highest in 15 months. The mania prompted regulatory authorities and exchanges to team up to quell the excesses, while banks including Brazil’s Itau Unibanco Holding warned the price gains weren’t justified in an oversupplied market.

Port holdings have expanded to 100 million tonnes. “The recent price spike was well above the levels supported by market fundamentals,” said Gerard Burg, senior Asia economist at National Australia Bank. “Stocks have been steadily rising, given the rebound in imports. This highlights again that the market isn’t that strong, and the price spike was excessive.”