Global iron ore prices fell to a new five year low overnight Wednesday, and is looking to go lower.
The price of Australian 62% (iron oxide content), for immediate delivery to the northern port of Tianjin in China fell to $US85.70.
That was down $US1 a tonne from the previous low of $US86.70 set on Monday.
That continues to meet forecasts for further falls – Goldman Sachs has forecast an average price of $US80 per tonne next year, while CLSA have warned it will hit $US75 per tonne by the second half of 2015.
The fall overnight takes the slide this ear to more than 35%. It means that economic growth this quarter will take another hit from falling prices for our biggest export.
Later this morning we will see the impact on the trade data for July, with another large deficit forecast, on top of those reported for the past four months.
The fall will be the major influence on local markets today after Wall Street closed mixed.
The Dow rose 10 points, Nasdaq dropped 25 points and the S&P 500 ended down a point, and clinging to the 2,000 point mark at 2,001.
Gold rose $US5 an ounce, and oil regained most of Tuesday’s losses to close more than $US2 a barrel higher on reports of ceasefire discussions in Ukraine and a fall in the value of the US dollar which saw the Aussie currency regain the 93 US cents to end on 93.40.
The prices of the major local iron ore miners will come under pressure.
That was after BHP Billiton fell 70¢ to $36.20 yesterday, though much of that drop was because the stock went its ex 62 US cents a share (67 A cents) final dividend. So the actual drop was a mere 8 cents.
Rio Tinto’s 1.1% to $62.34 was probably a better lead for the wider market and for investors today.
So was the 2.4% slide in the price of Fortescue Metals shares to end at $4. BC Iron was the worst-performing stock in the ASX 200, down 6.1% to $2.30.
Pure iron ore plays under pressure
It wouldn’t be a shock to see more of that weakness today.
