Iron ore prices have slumped to a fresh five-year low, due to an oversupply of the commodity and a slowdown in demand from China.
The iron ore price, as measured for immediate delivery at the Chinese port of Qingdao, fell below $US70 for the first time since 2009 to finish Tuesday at $US69.58 a tonne.
Demand for iron ore in China has fallen due to weakness in the country’s property sector, which is a major consumer of steel, while mining giants BHP and Rio Tinto continue to expand production.
IG market strategist Evan Lucas said prices would likely fall further.
“I’m expecting it to continue to fall because we continue to see mass overproduction,” he said.
That would put further pressure on smaller iron ore miners, many of whom have production costs above the current iron ore price.
“We are going to continue to see the pain that we have seen over the last two-and-a-half months,” he said.
“The junior miners are going to have a lot of pressure coming on them.”
The iron ore price has fallen around 47 per cent so far in 2014, prompting sharp dives in the share price of smaller miners.
Shares in BC Iron have dropped from $5.50 in February to 57 cents as of Tuesday, while Arrium’s shares have fallen from $1.29 to 25 cents.
Even the larger Fortescue has been punished, with its share price falling from as high as $6.23 to $2.81.
