Iron ore’s fall below $90 a ton has pushed as much as 170 million tons of production into losses, but prices will need to remain depressed for longer before enough supply exits to tighten the market, according to UBS Group AG.

Spot prices below that level are broadly consistent with the 90th percentile of the global cost curve, the bank’s co-head of Australian mining research Lachlan Shaw said in emailed comments on Wednesday. While lower Capesize freight rates in recent weeks have reduced charges for delivering ore into China, elevated diesel prices and currency moves mean costs haven’t shifted significantly.

Singapore iron ore futures, which closely track physical prices, have closed below $90 a ton twice in the last two weeks. They peaked in May at $111.60. On Thursday, they rose 1.4% to $91.50 a ton as of 10:05 a.m.

UBS said in a research note last month that iron ore prices draw fundamental support from a cost curve that has risen materially since 2020. The increase reflects not only energy and freight, but also declining grades.

“We would estimate 150-170 million tons of supply is currently cash negative at today’s spot prices,” Shaw said. However, he added the industry’s response may be delayed given the cost of shutting operations and restarting them later. Global production last year was 2.6 billion tons, according to the US Geological Survey.

Suppliers accounting for annual production of 15 million to 20 million tons have already reduced output or signaled cuts, Shaw said. Some smaller Brazilian producers last month said they were curbing output due to surging shipping costs.