Australia’s iron ore miners continue to feel the pain of the brutal slump in the price of the commodity, with falls on the local market in early trading.
As the price of iron ore sits on the cusp of falling below $US50 a tonne, Fortescue Metals Group lost almost 2 per cent of its value after the market opened to sit at $1.92, while Atlas Iron’s stock was off 3.85 per cent at 12.5c.
BHP Billiton, the world’s largest miner, was 1.7 per cent lower this morning at $30.50, while its main rival, Rio Tinto, was off 1.28 per cent at $56.60.
Overnight, Chinese iron ore prices monitored by The Steel Index fell $US1.90, or 3.6 per cent, to $US51 a tonne, representing a record low since the index starting monitoring prices.
When current freight prices of about $US4.50 a tonne are removed, it is the lowest price Australian iron ore has been sold at since March 2006, when prices were still negotiated annually. The price could face a fresh round of negative news today, with China’s official manufacturing index data due.
ANZ’s co-head of Australian economics, Felicity Emmett, said yesterday’s decision by Chinese policymakers to relax mortgage down payment requirements failed to arrest the downward momentum in iron ore prices.
“Mills and traders remain sidelined as threats of environmental inspections and speculation that as much as 40 per cent of steel mill capacity is pegged for closure keeps the outlook negative,” she said.
Deutsche Bank and London-based forecaster Capital Economics have joined a list of analysts, including Westpac, ANZ and Citi, in warning that the price of iron ore could fall below $US50 a tonne.
Deutsche Bank slashed its forecasts, projecting a retreat below $US40 a tonne before any recovery. The bank’s analysts also said prices would average $US51 a tonne this year, a 25 per cent downward revision to their previous expectations.
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