Iron ore price slips below $US60 a tonne

The iron ore price dipped on news that BHP and Vale’s Samarco joint venture is aiming to restart production in mid-2017.

Iron ore awaits loading at BHP Billition Ltd.'s loading facility at Nelson Point in Pt. Hedland, Australia. (Photographer: Nelson Ching/Bloomberg News)

The iron ore price has dropped below the $US60 a tonne threshold for the first time in a fortnight amid news of fresh supply set to come online next year.

Iron ore fell 1.6 per cent to $US59.10 a tonne in the most recent session, from $US61.10 the previous day, according to The Steel Index — its third straight day of falls.

Australia’s mining giants shrugged off the commodity’s gloom. In London trade, BHP Billiton shares rose 3.2 per cent, while Rio Tinto added 3.3 per cent.

The Samarco joint venture project between BHP Billiton and Vale is aiming to restart production in mid-2017, according to media reports, following a deadly tailings dam spill last year. The news of extra production in an already oversupplied market is negative for prices.

The commodity’s trade is also expected to be volatile in the short term as China’s local governments restrict some industrial activity to clear the air before the G20 Summit is held in Hangzhou on September 4 and 5. Morgan Stanley last week tipped these restrictions could cause sudden trading moves and even a sell-off.

Deutsche Bank analysts are the latest to warn that pain could be ahead for the commodity, which has recently been trading around three-month peaks in the low $US60s.

Iron ore imports into China rose 8.3 per cent month-on-month to 88.4 million tonnes, the highest amount for 2016 so far, Deutsche said in a research note.

“We would expect iron ore imports to remain robust for the remainder of the year,” Deutsche said, while also adding that “the momentum is fading” and that import growth “looks to be peaking”.

The steelmaking ingredient has spent recent months defying several analyst predictions of a looming slump into the $US40s, buoyed by Chinese stimulus and speculation.

The key export has now spent nearly eight weeks holding above the Federal Budget estimate of $US55 a tonne, which was widely seen as being too optimistic when it was published. Its strength is welcome news for Canberra, given a $US10 a tonne fall below estimates could wipe $1.4 billion off tax receipts.