A commentary by Wood Mackenzie research director Paul Gray on falling iron prices amid coronavirus pandemic:

"Having demonstrated remarkable resilience for the past two months, the price of iron ore has taken a big hit in the past two days. Benchmark 62% Fe fines closed at $80.20/tonne on 23rd March, back to the lows seen in early February. If the price holds at $80/tonne for the remaining six trading days of March, the average price for Q1-20 would be $88.50/tonne. Remarkably, this is still above our pre-crisis forecast of $85/tonne in December 2019. This is largely due to the resilience of Chinese hot metal production coinciding with supply side constraints in Brazil and Australia. We think iron ore's sell-off over the past few days is the start of a trend, not a blip.

"We are not yet looking at a glut of seaborne iron ore. But risks are escalating, and the balance is tilting towards a bigger hit to iron ore demand than supply. Targeted financial stimulus aimed at steel intensive infrastructure should cushion the fall, but our pre-crisis forecast for an annual average price of $80/tonne CFR is undoubtedly at risk and subject to revision.

"Our analysis shows that prices should gravitate towards US$70/tonne during the course of the year.

"But there are reasons prices could fall further, in particular, weaker than expected demand and falling costs.

"If demand turns out to be weaker than forecast and the iron ore market moves into acute oversupply, prices could fall as low as US$50/tonne and we view this as the lower bound for prices. Once prices fall to this level, they begin to approach the break-even of the major iron ore producers and a supply response becomes inevitable."