Iron ore price slips further below $US60 a tonne

Iron ore lost 1 per cent to $US58.40 overnight, as China restricts some industrial activity ahead of the G20 summit.

A mine worker watches as a haul truck is loaded by a digger with material from the pit at Rio Tinto Group's West Angelas iron ore mine in the Pilbara. (Photographer: Ian Waldie/Bloomberg)

The iron ore price has edged further below the $US60 a tonne threshold, continuing to slide as China restricts some industrial activity to clear the skies ahead of the G20 meeting.

Iron ore lost 1 per cent to $US58.40 overnight, according to The Steel Index, from $US59 the previous day.

The commodity has risen only once in the most recent seven sessions, and has given up 5.5 per cent since its recent three-and-a-half month peak of $US61.80 two weeks ago.

Analysts have warned that the steelmaking ingredient could experience some short-term volatility ahead of this weekend’s annual G20 summit, which is being held in China for the first time, as some steel mills close temporarily to reduce air pollution.

Several banks are also tipping the price to retreat from recent elevated levels over the rest of 2016 and 2017 as supply outpaces demand — although some forecasters have recently upgraded their estimates in acknowledgment of the commodity’s surprisingly strong run.

Macquarie analysts are the latest to predict further falls, despite offering a relatively bullish view on the future of the commodity.

The bank reaffirmed its view that iron ore should stabilise close to $US50 a tonne over the rest of fiscal 2017, while analysing the effect of port shipments from Western Australia.

The annual shipping rate peaked at around 840 million tonnes per annum in early July, then fell to around 800mtpa, but recovered towards 830mtpa in the past three weeks, according to Macquarie.

“As expected, declining shipping rates has generally seen opposite moves in iron ore prices,” Macquarie analysts said in a research note, acknowledging that a range of factors drive prices, including Chinese inventories and shipments from Brazil.

Shipping rates from WA have begun to recover after a fall over the first six weeks of fiscal 2017, “which we believe provides some further clarity as to the drivers behind the recent rally in iron ore prices,” Macquarie said.

Macquarie reaffirmed its outperform rating on Fortescue Metals Group and Rio Tinto, noting a preference for Rio over rival BHP Billiton.

In London trade, BHP Billiton shares lost 1.5 per cent, while Rio Tinto edged down 0.1 per cent.