Iron ore price dips to $US60 a tonne

The iron ore price continues to hold firm, as BHP prepares to unveil its worst loss ever.

Dock workers use industrial machinery to sort through iron ore in the yard of Qingdao port. CHINA OUT AFP PHOTO

The iron ore price has edged down slightly but remains at surprisingly strong levels ahead of BHP Billiton’s full-year results, which are expected to show the company’s worst ever loss.

Iron ore inched down 0.3 per cent to $US60 a tonne in the most recent session, according to The Steel Index, from $US60.20 the previous day.

The key export has now been holding above the $US55 threshold for six weeks, after jumping to $US55.90 on July 4, defying the many bears calling for the commodity price to slide over the rest of this year.

The May Federal Budget estimated that iron ore would average $US55 a tonne over the course of the following year, a forecast which was widely seen as too optimistic. Any slide in the price has the potential to put a dent in government tax revenues, so the recent strength will offer some welcome relief in Canberra.

BHP is expected to report a loss of $US6.8 billion ($8.9bn) this afternoon after it set aside up to $US1.3bn to clean up after the deadly Samarco tailings dam collapse in Brazil.

The company has also booked a writedown on its US petroleum assets and analysts have suggested further oil writedowns could be ahead.

Despite the miner’s low costs, it has felt the pinch as prices for its key commodities have weakened over the past few years. Iron ore traded around $US180 a tonne as recently as 2011 on soaring Chinese demand.

BHP boss Andrew Mackenzie’s comments on the state of the commodities cycle will be closely scrutinised.

In June this year, when iron ore was trading in the low $US50s, he said the commodity had “settled down now to a price that is more realistic”, although he added that higher-cost producers — many of whom had been incentivised by high prices and are now struggling to stay afloat — could continue to hang on for several years.

In London trade, BHP Billiton shares added 0.2 per cent, while Rio Tinto rose 1.1 per cent.