Western Australia Today reported that a dramatic slump in benchmark iron ore prices has seen the bulk commodity slip below USD 100 per tonne and experts believe it could continue falling below USD 80 per tonne before it starts recovering.

 

Prices for iron ore have not been this low since December 2009, creating headaches for Treasury revenues and the ASX listed companies that sell the commodity to Asia.

 

The benchmark iron ore price had spent much of the year around USD 135 per tonne, but began slipping seven weeks ago on the back of slowing construction activity in China and an oversupply of steel in that country.

 

UBS expert Glyn Lawcock said he expected the price could continue falling for some time yet. He said that “Now that it has broken through USD 100 per tonne, traders I speak to think the price could get a seven in front of it. We may not see a pick-up in demand until after the holiday season in October which means the iron ore price just drifts until then."

 

But Mr Lawcock said he expected the slump to be temporary because numerous big projects in China had been approved in the June quarter and were still going through the tendering phase at the moment.

 

Mr Lawcock said he expected construction activity on those projects to get underway in earnest in the December quarter, meaning the iron ore price would pick up again then. He said that "Our view is that it will be higher by year end. We think it will probably be back above USD 120 per tonne by Christmas.”

 

Most analysts have long believed that a virtual “floor” exists beneath the iron ore price somewhere around USD 120 per tonne.

 

That price is where a large number of high-cost Chinese iron ore producers have their break-even point, and given they typically supply around 30% of China's iron ore needs, most analysts have long believed the price could not dip below the “floor” for long.(Source: steelguru)