IO below $55p/t

As expected...
Iron ore price plunges below $US55

• Daniel Palmer
• 5 hours ago

• Economy
• Commodities
• Markets

The price of iron ore has sunk over 5 per cent overnight, raising the prospects of a fall to $US50 a tonne in the near term.

At the end of the latest offshore session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US54.50 a tonne, down 5.4 per cent from its previous close of $US57.60 a tonne.

The sharp retreat extended the six-year low reached in the prior session, with the commodity's value slumping over 15 per cent in the past month alone after falls of nearly 50 per cent in 2014 and a soft start to 2015.

At the beginning of 2014 the commodity was trading at $US135 a tonne.

The ongoing retreat relates to concerns about an oversupplied market as big miners lift production and Chinese demand growth stalls. However, the bulk of the recent falls may be attributed to collapsing oil prices as US crude hit a fresh six-year low on Wednesday.

Lower crude prices reduce output costs for miners, lowering the cost of supply. The strength of the US dollar and an admission from Beijing that its growth target will be difficult to achieve have also weighed.

The latest pricing development follows a revision to forecasts from HSBC, with analysts at the bank trimming projections from $US80 a tonne to $US58 a tonne, a level more in line with most other forecasters.

Several analysts have recently warned of a fall to around $US50 a tonne before a price floor can be found.

Meanwhile, the persistent weakness in the commodity's price contributed to Fortescue Metals Group pulling a planned $US2.5 billion debt refinancing. The news, delivered to the market on Wednesday ahead of the latest price falls, saw the iron ore miner's stock get crushed, losing 5 per cent on the day to end at a six-year low.

The broader sector is vulnerable to further falls on Thursday given the extent of the price retreat overnight and softness in the stock of BHP Billiton and Rio Tinto in London trade.

The London-listed stock of BHP and Rio lost 0.3 per cent and 1.5 per cent respectively, despite the broader FTSE 100 jumping 1.5 per cent.

http://www.businessspectator.com.au/news/2015/3/19/commodities/iron-ore-price-plunges-below-us55