The Spectacular Collapse of Iron Ore
Falling commodity prices and a weak outlook for growth have increased the chances for a rate cut by the RBA next week – further applying downward pressure on an already weakened AUD. The ASX 200 fell over 30 points last night, as the prices of Iron Ore continue to feel the impacts – with mining & energy stocks leading the way. BHP has lost 2.2% & Rio Tinto ended the session 1.4% lower today.
Iron Ore at 10 year lowsThe recent $13bn purchase of a Chinese owned mine in Australia have most definitely awakened this bear. Dubbed the “Sino Iron Project” it has been heavily criticized by the industry – as the Chinese plan to pump millions of tons or Iron Ore into an already over-supplied market. China in Peru, Africa & now Australia On Tuesday, Iron ore fell to $51 per metric ton. That is the lowest it has been since 2004. This now forces the likes of Rio Tinto & BHP to curtail output to boost prices. However, China is not stopping – as the state owned firm citic are planning a 30 year project expanding Worldwide. Even despite the Chinese GDP slowdown, the country still aims to protect it’s future needs.
Realities The iron ore price would have to hit about $30 before the two major corps would risk losing money. Many voices in the industry point towards a wall around $45… but let’s see what happens following next weeks prospective rate cuts.
Meanwhile… Iron Ore continues to slide…
