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CBA commodity analyst Vivek Dhar has a note out this morning on the fall in iron ore prices, which continued yesterday with a 1.3% decline to $US128/tonne.
Iron ore prices peaked at $US144/tonne earlier this month, but Mr Dhar says a correction is "underway" and "likely has more to go".
"China's steel mill margins have slumped as iron ore prices have increased," he observed.
"Typically negative steel mill margins will weigh on iron ore prices, albeit with some lag historically, as the economic incentive to produce steel and consume iron ore is reduced.
"The last time that steel margins in China were this negative or lower for a sustained period in late June 2022, iron ore prices eventually dipped below $US100/t. The current downward correction in iron ore prices could threaten the same level temporarily too.
"However, once steel mill margins stabilise, we think iron ore prices are likely find support in the $US100-$US110/t range, waiting in anticipation for China's policy direction for 2024.
"China's 'Two Sessions' policy meetings in March, where policymakers announce China's economic growth targets for 2024, is shaping up to be a key event for iron ore and other commodities. We think policymakers will announce an economic growth target of around 5% in 2024, similar to its target last year."