We permit the publication of our auditors’ report, provided the report is published in full only and is accompanied by the full financial statements to which our auditors’ report relates, and is only published on an access-controlled page on your website, to enable users to verify that an auditors’ report by independent accountants has been commissioned by the directors and issued. Such permission to publish is given by us without accepting or assuming any responsibility or liability to any third party users save where we have agreed terms with them in writing.

Our consent is given on condition that before any third party accesses our auditors’ report via the webpage they first document their agreement to the following terms of access to our report via a click-through webpage with an 'I accept' button. The terms to be included on your website are as follows:

I accept and agree for and on behalf of myself and the Trust I represent (each a "recipient") that:

  1. PricewaterhouseCoopers LLP (“PwC”) accepts no liability (including liability for negligence) to each recipient in relation to PwC’s report. The report is provided to each recipient for information purposes only. If a recipient relies on PwC’s report, it does so entirely at its own risk;
  2. No recipient will bring a claim against PwC which relates to the access to the report by a recipient;
  3. Neither PwC’s report, nor information obtained from it, may be made available to anyone else without PwC’s prior written consent, except where required by law or regulation; and
  4. PwC’s report was prepared with Hermes Property Unit Trust's interests in mind. It was not prepared with any recipient's interests in mind or for its use. PwC’s report is not a substitute for any enquiries that a recipient should make. The financial statements are as at 25 March 2017, and thus PwC’s auditors’ report is based on historical information. Any projection of such information or PwC’s opinion thereon to future periods is subject to the risk that changes may occur after the reports are issued and the description of controls may no longer accurately portray the system of internal control. For these reasons, such projection of information to future periods would be inappropriate.
  5. PwC will be entitled to the benefit of and to enforce these terms.
I accept

1. Select your country

  • United Kingdom
  • Austria
  • Australia
  • Belgium
  • Denmark
  • Finland
  • France
  • Germany
  • Iceland
  • Ireland
  • Italy
  • Luxembourg
  • Netherlands
  • Norway
  • Singapore
  • Spain
  • Sweden
  • Switzerland
  • USA
  • Other

2. Select your investor type

  • Financial Advisor
  • Discretionary Investment Manager
  • Wealth Manager
  • Family Office
  • Institutional Investor
  • Investment Consultant
  • Charity, Foundation & Endowment Investor
  • Retail Investor
  • Press
  • None of the above

3. Accept our terms and conditions

By clicking Proceed I confirm I have read the important information and agree to the terms of use.


The Hermes Investment Management website uses cookies to remember your preferences and help us improve the site.
By proceeding, you agree to cookies being placed on your computer.
Read our privacy and cookie policy.

The iron ore meltdown in three charts

Home / Press Centre / The iron ore meltdown in three charts

09 July 2015

After a strong second quarter, the price of iron ore has resumed its collapse amid strong supply, weak demand and rising protectionism in the steel market. These three charts explain how the market arrived at this situation and illustrate the implications for credit investors, says Andrey Kuznetsov, Credit Analyst, Hermes Credit

Chinese smelters cool down
China’s industrialisation has driven a substantial increase in the demand for iron ore in the past 25 years. Annual consumption of steel increased more than 10-fold from about 70m tonnes in the early 1990s to more than 700m tonnes in recent years. China’s share of global iron ore imports has increased from about 10% in 1990 to 81% in 2014, making the appetite of its steel industry the most important demand-side force in the market.

Figure 1. China steel consumption

china steel consumption

Source: Bloomberg, Hermes Credit as at May 2015

Australia and Brazil are key suppliers
This trend has encouraged iron ore-rich countries like Australia and Brazil to increase production. The nations accounted for 92% of total global exports of iron ore, split 62% and 30% respectively in 2014. Other major exporters are South Africa, Canada and India, which supply 4%, 3%, and 1% respectively. Consequently, exports by Australia and Brazil are the most important supply-side driver in the iron ore market.

The Q2 rally is done
Supply-side shortages drove the rally in iron ore prices, from $47 per tonne at the start of April to $65.5 per tonne in mid-June, which is the period that typically experiences the strongest seasonal demand. The shortages were caused by the temporary closures of mines by smaller producers and slower output from some of the majors. In recent weeks, the continued decline in Chinese steel prices and greater protectionist measures being either implemented or contemplated across the globe exacerbated the effects of a seasonally slower quarter. On the supply side, some of the smaller players restarted operations, Atlas Iron being one example. Statistics released last week by the Port of Port Hedland, in Western Australia, show that June was a record month for exports, with year-to-date volumes up 13% compared to this time last year. A record daily run rate of 1.28m tonnes per annum was also recorded. This combination of strong supply, low prices and protectionism has led to a sharp re-pricing of the iron ore market.

Figure 2. Prices of iron ore and steel

prices of iron ore and steel

Source: Bloomberg, Hermes Credit as at 9 July 2015

What’s next?
Looking further ahead, the major producers will continue to increase capacity to compensate for lower prices, forcing less cost-competitive players out of the market. We should expect Vale, BHP Billiton, Rio Tinto and other producers to seek to expand their operations. However, demand is not expected to match this increase, due to the still-sluggish recovery in Europe and the slowdown in emerging markets – particularly in China. Without a recovery in steel prices, we don't expect a significant increase in iron ore prices in the short term. The investment implications are clear: an underweight exposure to steel and iron ore producers and steel makers is appropriate until a renewed equilibrium in steel markets, supported by an enduring source of demand, is reached.

Figure 3. Steel prices in the US, Europe and China

steel prices in the USA, eu, china

Source: Bloomberg, Hermes Credit as at 9 July 2015

Share this post:

Find posts by author

  • Alex Knox, ACA
  • Andrew Jackson
  • Andrew Parry
  • Claire Gavini
  • Dr Michael Viehs
  • Emeric Chenebaux
  • Eoin Murray
  • Geoffrey Wan, CFA
  • Harriet Steel
  • Ingrid Holmes
  • Louise Dudley
  • Mark Sherlock, CFA
  • Martin Todd
  • Michael Russell, CFA
  • Michael Vaughan
  • Neil Williams
  • Nick Spooner
  • Nina Röhrbein
  • Philip Nell
  • Saker Nusseibeh
  • Silvia Dall’Angelo
  • Tatiana Bosteels
  • Tim Crockford
  • Tommaso Mancuso

Find posts by category

  • credit

Press contacts