Iron ore price slides to $US55 a tonne as DB eyes more pain ahead

The iron ore price has fallen for the third straight session and is now trading in line with the May budget forecast.

 

The iron ore price has fallen for the third straight session to trade exactly in line with forecasts provided in the May Budget, and it could be set to fall through the key threshold if the current trend continues.

Iron ore inched down 0.2 per cent to $US55.00 a tonne overnight, according to The Steel Index, from $US55.10 yesterday.

Moves in the commodity have been subdued this week as many markets in China remain closed for a week-long public holiday.

But the key export has been gradually trending lower since mid-August, when it reached a peak of $US61.80 that was widely seen as unsustainable.

If the downward trend continues, iron ore could be well on its way to meeting near-term analyst forecasts of a price in the low $US50s or $US40s, after spending much of this year at surprisingly robust levels.

The commodity has managed to hold above budget estimates for three-straight months, offering some respite to Canberra, but federal revenues are sensitive to any declines. A $US10 a tonne fall would wipe out $1.4 billion in tax revenue, by the government’s own estimates.

Deutsche Bank is the latest to offer a bearish assessment of the export’s prospects, tipping a fall into the low $US40s as the market remains oversupplied.

The call follows a downbeat forecast from Goldman Sachs, which expects a price of $US36 for 2017.

In London trade, BHP Billiton rose 1.5 per cent, while Rio Tinto added 0.5 per cent.