Iron ore prices are in free fall.
According to Metal Bulletin’s iron ore index the spot price for 62% fines has dropped 10.1%, the biggest daily drop on record, to $44.59 a tonne. Here’s the chart:
The price collapse is being driven by two main factors:
Evidence that supply is continuing to increase out of the world’s biggest producer countries, Australia and Brazil, and
Concern that Chinese demand is tanking as the economy slows.
Economists estimate that each $1 fall in the iron ore price results in around $300 million in lost tax revenue for Australia. So today’s fall alone of $5 in the price equates to roughly $1.5 billion being knocked off the budget bottom line.
The sharp and sudden decline will raise fresh questions about the viability of some iron ore miners.
Fortescue Metals Group fell 6% on the ASX today following yesterday’s 8% fall in the ore price. Investors will be taking a close look at the stock tomorrow.
Source: Business Insider
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