Iron ore just can’t stay out of the news. The commodity has hit another post-financial crisis low—and a record low—when it hit $US52.90 overnight. This was down 2.2 percent from its prior close of $US54.10 a tonne.
Although analysts believe the commodity is reaching the bottom of its trading, and boy, do the rest of us hope so too, investors continue to worry about the oversupply in the market, which shows no sign of lessening. The fall is the second straight six-year trough for the commodity.
China is the biggest influencer on the price of—and worry over—iron ore. Demand for iron ore in the Asian country is feared to start flatlining after several months of it slowly dropping. The latest downward move in price is mostly attributed to this, as well as the renewed strength of the US dollar.
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Rio Tinto Expanding Iron Ore Mine In Pilbara Despite Price At Five-Year Low
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Voices attacking the iron ore industry for inflating the market have gotten a little louder recently, adding Fortescue Metals Group’s founder and chairman Andrew Forrest to the list. Forrest, among others, has called for cutbacks in supply from the big iron ore producers: BHP Billiton, Vale and Rio Tinto. Forrest has gone on to say that if these large companies were to hold back on plans to increase production, the prices could recover drastically and go back to trading at around $US90 a tonne.
According to Business Spectator analysis, Forrest is arguing in the face of a $US1 a tonne breakeven price on production of iron ore. For his business, and several other mines in Australia and abroad, something is going to have to change to slow down the dropping prices.
Information sourced from The Daily Telegraph.