The price of iron ore has sunk to new depths overnight, losing another 1.2 per cent to hit a fresh five-year low.
Benchmark iron ore for immediate delivery to the port of Tianjin in China is currently trading at $US82.20 a tonne, down sharply from its $US83.20 closing mark in the previous session.
The commodity has now lost 40 per cent on the year and has seen just one positive trading day in the past 17 amid concerns about rising supply from Rio Tinto, Vale, BHP Billiton and Fortescue Metals Group and weakening demand from key customer China.
The latest falls followed a revision to pricing estimates from Goldman Sachs, with analysts at the investment bank suggesting more pain could be in store.
“The price decline has been dramatic, but a weak demand outlook in China and the structural nature of the surplus make a recovery unlikely,” Goldman analysts Christian Lelong and Amber Cai wrote in a note titled ‘The End of the Iron Age’.
“Lower prices for iron ore and steel are unlikely to boost demand in a material way. Instead, the day when steel production in China will peak gets ever closer.”
Goldman, while retaining its forecast of $US80 a tonne for 2015, reduced its 2016 forecast to $US79, from $US82, and its 2017 outlook to $US78, from $US85.
The latest developments have seen Macquarie Bank analysts lower their profit forecasts for BHP, Rio and Fortescue, with the profit hit set to come close to $10 billion over the next two years, according to The Australian.
The one silver lining in the commodity’s retreat this week for local miners has been a similarly large fall in the value of the Australian dollar. The unit is now trading comfortably below US92c after holding above the US93c mark as the initial falls in the iron price were realised in recent weeks.
Source: The Business spectator
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