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PrintThe price of iron ore is sitting under $90 a tonne, after dropping more than 30 per cent over the last three months.
It's a three-year low for the commodity, and a far sight from the highs of $180 a tonne seen last year.
Ken Brinsden, managing director of Atlas Iron, says the speed of this drop looks to have caught the industry out, but he doesn't expect the low prices will last.
"We don't expect that circumstance is sustainable, there's just too much production around the world that's not cost competitive at that price and therefore would have to come out of the market," he said.
"In simple terms, that's going to lead to a supply gap and we would expect the price bounce back."
Alex Passmore, head of research for Patersons Securities, says China's next move will dictate what the price does.
"There are some high-cost mines over there and the (Chinese) Government could end up subsidising those, which is a real risk to our production here and the prices we receive," he said.
"Or alternatively, the Chinese mines could close down and that would see the iron ore price re-establish a marginal cost of production price floor around $110, $120 a tonne."
The slowdown in China has also slackened demand for Australian coal.
Economist Peter Sheehan says lower prices means states will have less royalties to spend in budgets and major projects will suffer.
"It will delay some new projects, it'll mean the miners and others will make less money," he said.
"The biggest project is the Roy Hill project, the Gina Rinehart project in Western Australia, a very large project which is due to get the final investment decision next year.
"Probably it will still go ahead, but this isn't going to make it easier."(Source: ABC Online)
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