Iron ore prices head towards new low


But CMC Markets chief market strategist Michael McCarthy said the price slide was good news for low cost producers like Rio Tinto and BHP Billiton, which have a break even price of around $US42 and $US51 a tonne, respectively. "In the longer term this probably falls right into the hands of Australian producers, who are among the highest quality and lowest cost producers in the world," he said.

He said if the price falls below $US80 a tonne for a prolonger period, more than 80 mines worldwide will need to close, including 13 in Australia. "The key issue for the iron ore market is that for the first time in over 10 years the job of the iron-ore market/price is now to eliminate supply, rather than incentivise it," he said.

But Mr McCarthy does not expect the current price slide to last, and is forecasting an average price of between $US100 and $US110 a tonne for the next 12 months. "I would expect to see some recovery in prices soon," he said. "Steel demand is continuing to grow in China, albeit at a slower rate, but its still growing.

The price slide threatens a number of higher cost Australian producers, including Atlas Iron, which has a break-even point in the low-to $US80 a tonne range.

Read more here: Business Spectator


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