São Paulo – Iron ore prices declined by 16.5% over the past 12 months and 22.8% year to date in the London Metal Exchange (LME). The falling prices of iron ore, which on Tuesday (12) was at USD 108.40 a tonne, have a reason: China. The country, which is the world’s largest consumer of the commodity, has a large supply and a lower demand mostly due to a downturn in construction caused by a largely indebted real estate industry. (Pictured, iron ore supply in Suzhou in China’s Jiangsu province.)

According to Guilherme Gomes, International Trade Consultant at BMJ Consultores Associados, this price reduction may be bad for mining businesses but good for consumers – who can buy it for smaller prices – and for exports from Brazil to Arab countries. Moreover, Gomes says, prices could remain lower in the medium term as they depend on China to recover.

“This price drop may be temporary, as it was the result of the combination of higher-than-expected iron ore shipments to China and a smaller demand than it was foreseen for the beginning of the year. However, the Chinese economic slowdown throughout this year may extend the downturn in iron ore prices, which could take a long time to return to previous levels,” says Gomes.