Arab Today, arab today iron ore plunges as china rout hurts commodity markets
Last Updated : GMT 20:51:12
Arab Today, arab today
Arab Today, arab today

Iron ore plunges as China rout hurts commodity markets

Arab Today, arab today

Arab Today, arab today Iron ore plunges as China rout hurts commodity markets

The fall in iron ore and other commodities comes
Sydney - AFP

Iron ore prices plunged to fresh six-year lows Thursday as contagion from China's stock market rout hurt commodity markets, with resource-heavy economies like Australia bearing the brunt.

The spot price of the commodity used to make steel took its biggest one-day hit ever overnight, falling 10 percent to $44.59 a tonne, analysts said, as demand in key market China continues to shrink. Prices were last at this level in May 2009.

At this level, most Australian miners would be producing at a loss, with the exception of low-cost giants like Rio Tinto and BHP Billiton.

Even the majors are feeling the pressure, with shares in both BHP and Rio trading near yearly lows on Thursday.

"The risk from Chinese equities markets is clearly impacting commodities markets," IG Markets strategist Evan Lucas said in a note on "commodities contagion".
"Iron ore has just logged its worst trading day on record. The steel price in China is now cheaper per tonne than cabbage."

While copper jumped as the US dollar slipped, oil prices were also on the slide, with US benchmark West Texas Intermediate falling 68 cents to $51.65 a barrel on Wednesday, its fifth day of losses.

Many agricultural commodity prices were also weaker, including cotton and wheat.

The fall in iron ore and other commodities comes as China's share market remains in free fall, even in the face of Beijing's efforts to calm investors.

China has suspended trading in more than half of the country's listed stocks, banned short selling and new listings, and enlisted the help of the country's major stockbrokers through a huge stabilisation fund.

But the moves have so far failed to stop the bleeding.

ANZ analysts also linked the commodity pressure to the Chinese market, and noted that "while there are some signs of prices stabilising, any sustained recovery in commodity markets is unlikely in the short term".

Iron ore is Australia's largest export and government revenue has taken a hit as the price dives.

Last month, Canberra lowered its forecast for iron ore prices to $54.40 a tonne for this year and $52.10 in 2016 as China's output of steel weakens.

 

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