The price of iron ore continues to slump, and has dropped below US$50 a tonne for the first time since April.
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The top suppliers, including Rio in Australia and Brazil’s Vale remain intent on increasing supply as they seek to boost volumes and reduce costs per ton, expanding a glut even as demand in China slows.
However, with the price of iron-ore falling since the start of this year, a debate had emerged on whether the industry or government policy-makers could have acted to ensure that Australia could have maintained a foothold in a higher priced world. The majority of its earnings come from iron ore. A fall this big, coming after the price dropped 11 per cent in the previous two days, surely has more to do with the sharemarket than iron ore market fundamentals. AUSTRALIAN DOLLAR: The local currency has fallen to a six-year low against the backdrop of the Greek crisis, tumbling Chinese share prices and falling commodity prices, briefly dipping below 74 United States cents.
According to Metal Bulletin’s iron ore index the spot price for 62% fines has dropped 10.1%, the biggest daily fall on record, to $44.59 a tonne. Iron ore may collapse significantly below the US$47-a-ton low that was set earlier this year, he said. “And Australia’s experimentation with export controls in the 1970s and 1980s saw Japanese investment support Brazilian iron ore capacity instead of Australian”.
An analysis by global bank HSBC suggests the stock market wealth effect has less of an impact on consumption than many think, with less than 15 per cent of Chinese households investing in shares.
But many analysts predict a fall to below $US40 in the next year or two.
Australia-based BHP Billiton mines, extracts and produce aluminium, coal, copper, iron ore, manganese, nickel, silver and uranium, and oil and gas. PJP said any intervention was likely to be “ineffective at best and counter-productive at worst”.
Iron ore may decline to average $50 this quarter as supply expands, led by mines in Australia, and there are further cuts to steel output, according to Morgan Stanley.
Under the agreement, Atlas has agreed to pay BGC an option fee of A$3.45m ($2.6m) in its shares representing A$3m ($2.3m) credit against the future purchase of the Mt Webber crushing as well as screening plant.
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The price of iron ore is tumbling to levels which threatens to leave some junior miners unprofitable.
