“The three Aussie majors are unlikely to get into financial difficulty at least at this stage,” Mills said as the iron ore price is still relatively strong and Australia’s big three, BHP, Rio Tinto and Fortescue, are among the world’s lowest cost producers.

Iron ore contributed $125 billion to Australia’s export revenue last financial year and made up nearly half of BHP’s revenue, at $US24.8 billion, for the year ending June 2023.

Media reports out of China and from Bloomberg say steel production in Yunnan province has been cut and mills in Guangdong province will shut blast furnaces or rolling mills for maintenance over the next four weeks, cutting output between 20 and 50 per cent.

BHP’s vice president of market analysis and economics, Huw McKay, said in a commodity outlook late last month that China recorded its fifth consecutive year of crude steel production above 1 billion tonnes on the back of solid demand in non-housing sectors and a material jump in net exports to a seven-year high.

However, McKay said many China watchers were surprised by iron ore’s rally and subsequent slide. “Rarely has the performance of a major commodity price confounded so many,” he observed.

McKay said China’s economy and supply chain was showing strength in a broad range of other industrial additivities, apart from housing, which are collectively important for steel demand. “Over the course of this multi-year downturn, commercial housing had shrunk appreciably in terms of its total share of steel end-use, and therefore even with profound weakness in property, it was becoming a less influential swing factor in the overall balance” of demand, he said.

The iron ore supply being shipped by major producers, primarily Australia and Brazil, hasn’t increased enough for BHP to reassess its support for a cost range between $US80 and $US100 a tonne, McKay said. “We anticipate another year of a broadly balanced iron ore market on average across the 2024 calendar year, although there are multiple uncertainties feeding into that assessment,” he said.

Citibank analysts said 17.5 per cent of iron ore imported into China in January and February came from non-traditional sources, compared to the 10-year average of 14 per cent, one of the highest levels in recent years. “With prices falling sharply from mid-February, imports from non-traditional sources should moderate going forward,” they said.