Iron ore prices are on the verge of dropping to $50/tonne, according to one city trader on Tuesday. Other analysts suggest that any fall to that level would only be temporary, however, and a new trading range in the high 50s and low 60s may continue in the coming weeks, Kallanish notes.

"Chances are with the steel margins where they are, there will be a fall in iron ore prices to around $50 a tonne," Mark Lyons, Citi’s trading head for iron ore and steel told a mining conference in Australia on Tuesday. He noted that the Chinese steel market is weak and coming under increasing pressure.

Despite weak sentiment, a build-up of unsold ore over the Chinese New Year holidays and the threat of environmental controls reducing steel production the fundamentals of the market have not changed significantly since before the holidays however.

The claim by Lyons that China’s finished steel exports would plummet by 20 million tonnes to 70mt this year, putting added pressure on domestic prices, seems to be contradicted by the facts so far. Although February exports were down from January, they were still over 100mt on an annualised basis. Over January-February, China exported over 18mt of finished steel, meaning exports would have to fall by another 33% this month to just over 5mt/month and stay flat for the rest of the year. Exports have not been that low since 2013.

Steel production increased around 8% in late February according to the China Iron and Steel Association, boosting iron ore consumption. This increase will be countered by an increase in supply in the coming months with new expansions from Rio Tinto.