AUSTRALIA’S iron ore producers are likely to take a hit in the market today after the price of the bulk commodity fell to an almost two-year low over the weekend.
The top producers, BHP Billiton, Rio Tinto and Fortescue Metals Group, all saw their share price take a shave at market close on Friday when the iron ore price hovered at a 21-month low of $US91.50 a tonne.
The price of the steelmaking commodity lost more ground at the weekend and is now sitting at $US90.90. The price of Australia’s top export was down over 3 per cent last week, which was the eighth weekly loss in nine.
The iron ore price has now lost about 32 per cent this year, with the profit hit on producers likely to be seen when the next set of financials are released in August.
Iron ore futures in China also slid to a new record low on Friday, falling to their weakest level since the market started in 2009 as consumption of the commodity slows along with the pace of construction activity during China’s hotter summer months.
Citi’s Ivan Szpakowski outlined in a recent note on iron ore that the price had now “decisively” broken out of the $US120 to $US140 a tonne range where iron ore had traded over 2012 and 2013.
“The decline has spurred a race among analysts to lower price forecasts for the remainder of 2014, with many competing to be the most bearish,” he said.
Citi forecasts a price of $US100 a tonne for the fourth quarter this year.
Mr Szpakowski said an ore price of $US90 a tonne would be supported by traders and steel mills and could force many high-cost Chinese producers to cut back output. But, he added, if that price is sustained, many mines outside China could also cut back production.
Deutsche’s London-based analysts have cut its iron ore forecasts to reflect the weakening market fundamentals.
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