17/12/2014 – Iron ore falls for eighth straight day
Iron ore prices have fallen for an eighth straight trading day, barely holding above the five-year low reached at the end of November amid a broader slump in commodity prices.
At the end of the latest offshore session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US68.10 a tonne, down 0.7 per cent from its previous close of $US68.60 a tonne and within touching distance of the recent five-year low of $US68 a tonne.
The red session was the eighth in succession for the commodity, which has lost about half of its value this year due to surging supply and flagging demand growth.
The latest falls follow a sharp revision in the Abbott government’s forecast for the commodity’s price next year to $US60 a tonne, a move which slashes billions from budget forecasts. The revision in this week’s Mid-Year Economic and Fiscal Outlook (MYEFO) comes just seven months after the May budget revealed a forecast of $US95 a tonne, a figure many labelled conservative.
Despite the weakness on iron ore markets, bargain hunters jumped into the UK stock of leading local miners Rio Tinto and BHP Billiton overnight, with the heavyweights gaining 4.2 per cent and 3.3 per cent, respectively.
BHP’s iron ore chief Jimmy Wilson last week said the miner was anticipating continued weakness on iron ore markets, with forecasts of around $US65 a tonne for 2015 labelled as “appropriate”.
Analysts have been sharply revising their expectations for the next couple of years, with most now sitting in the $US60 to $US70 a tonne range.
The latest investment bank to lower its forecast is Morgan Stanley, which cut its 2015 prediction by 9 per cent overnight to $US79 a tonne, a level at the upper end of broader market expectations.
Morgan Stanley said many of the mines that have gone into operation over the past decade were currently “unviable” due to an unwavering supply surge led by Australia.
Source – BusinessSpectator.com.au