Author: Paul Ploumis27 Aug 2014 Last updated at 05:39:51 GMT
WASHINGTON (Scrap Monster): At Steel Index, iron ore prices fell lower to 89.2 dollars from 90 dollars per tonne, this decline is, very much threatening than other low points in September 2012 and the mid of June of current year.
The earlier low points were all very brief and short lived, but fear increases as iron ore is being prolonged for five year decline, which will absolutely diminish the remuneration of BHP Billton, Fortesque and Rio Tinto and will also result in the jeopardizing the viability large scale producers.
The weakening in oil prices has created red alarm in the market as there has been 13% price decline since past two months to 93.75 dollars per barrel. The sudden fall in the prices may be due to the geological disturbances caused in Middle East Countries. The supply of many jive producers have been declining since the weakness in oil. According to analysts at Morgan, this may be due to the shortfall of production in Middle East countries.
The Shale production blast in the United states have declined the imports in the world’s biggest consuming country.
The back out of the Australian dollar from 1.03 dollars in 2013 financial year, to 92 cents in 2014 financial year is diluting the gross impact on the declining prices of key commodities.
The recent improvement of dollars, just below 93 cents had proven that producers cannot depend on the decline in the dollar. The average price of iron ore in 2013 was 135 dollars per tonne whereas now, in 2014 the average price of iron ore is 111 dollar per tonne. In case, if the average price will turn 90 dollar per tonne for iron ore in the financial year, the company will have a 31 billion dollar tax hit. Western Australian’s royalties along with Canberra’s tax receipts will be walloped.
The sharp decline in price might be due to the crawling increase in Chinese demand, and the seaway supply to China is increasing particularly from Australia. As China is one of high cost domestic iron ore producer, it is cheaper for them to import rather than to produce.