ONE of the longest losing streaks for the price of iron ore continues unbroken after the commodity lost ground for the eighth straight trading day.
The latest retreat marks a fresh two-year trough for the commodity, while moving it very close to its lowest level since the financial crisis.
Benchmark iron ore for immediate delivery to the port of Tianjin in China is currently trading at $US87.30 a tonne, down 1 per cent from its $US88.20 closing mark in the previous session.
The commodity has lost over 5 per cent over the past week and close to 35 per cent for the year.
The benchmark price is now just US60c above a low reached on September 5, 2012 and if it dips under $US86.70 it will be at its lowest ebb since October, 2009.
Falls overnight were again based on oversupply worries, with recent production expansion from the likes of iron ore heavyweights Rio Tinto, BHP Billiton, Fortescue Metals Group and Vale coming as weakness in the Chinese housing market ensures demand is kept in check.
The extent of the recent falls is now starting to have a serious impact on the share prices of the sector heavyweights, with Rio Tinto’s UK-listed stock sinking 4 per cent overnight and BHP’s UK-listed shares yielding almost 3 per cent.
This represented a sharper decline than that seen during the local session on Thursday, with Rio and BHP both losing about 1.5 per cent. Meanwhile, Fortescue gave up 4 per cent, while smaller competitors BC Iron and Atlas Iron sunk 3 per cent and 7 per cent, respectively.
The price of iron ore is crucial to the profitability of the mining giants, particularly Rio Tinto, but their low costs relative to the rest of the industry allow for a less painful absorption of the price falls than their rivals. Indeed, the latest production boost from the likes of BHP and Rio is seen as part of a plan to put pressure on their smaller competitors, particularly those in China that are much higher up the cost-curve.
Atlas, meanwhile, yesterday announced a full-year profit result that failed to cheer investors, largely due to its admission it was edging very close to breakeven point as the iron ore price sinks. However, it signalled optimism about a short-term recovery.
“Nobody likes to see their margins getting squeezed, we would say we’re falling into that category,” managing director Ken Brinsden said.
“[However], we would suggest it can’t get too much lower than it is today for a long period of time because it just decimates the top end of the cost curve.”
Mr Brinsden echoed similar sentiments to those of Fortescue boss Nev Power last week, who said his firm expected an upward drift in the price of the commodity in the near-term.
However, BHP Billiton’s Andrew Mackenzie was less effusive, noting his firm’s expansion was based on price levels comfortably below $US100 a tonne, with the $US100 mark unlikely to be breached anytime soon.
Source: the Australian
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