Spot iron ore prices are at their lowest level since September 2009 amid a flood of excess inventory and waning demand from China, the world's largest iron ore consumer, and experts say small mine closures may be the only catalyst for higher prices.
"A large share of what is currently produced occurs at a marginal cost that is around the current spot price. If the price falls further, production is likely to be cut back, which would, in turn, limit supply on the market," sending prices higher, HSBC economists said in a report published Wednesday.
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Rio Tinto CEO Sam Walsh echoed that view this week, saying the firm expects global iron ore capacity to fall by 125 million tons, or 10 percent, this year, Reuters reported.
Indeed, there have been several mine closures in China, home to majority of the world's lower-grade producers. As of June, 20 to 30 percent of domestic mines have been idle, according to the China Metallurgical Mining Enterprise Association.
"As the cost curve rises, it will take lower quality suppliers out of the market, leaving only prominent producers," Stan Shamu, market strategist at IG, told CNBC.