Iron ore sinks further below $US60 a tonne

The iron ore price has dropped to a fresh six-week low, as it continues to retreat from last month’s $US62-a-tonne peak.

Rio Tinto iron ore mining operations.

The iron ore price has dropped to a fresh six-week low, as it continues to retreat from levels widely seen as unsustainable given the oversupplied market.

Iron ore shed 1.5 per cent to $US57.40 a tonne overnight, according to The Steel Index, from $US58.30 the day before.

The commodity has risen for just two of the past 12 trading sessions, and is now off 7.1 per cent from August’s three-and-a-half month peak of $US61.80.

Some trading volatility had been expected around the recent G20 summit, when local governments moved to restrict industrial activity to clear the air.

The leaders’ decision at the conference to work on reducing a global steel glut is also a negative for the key steelmaking ingredient.

Aside from the G20, a chorus of analysts have been calling for the commodity to decline from the $US60 a tonne mark, saying prices were only enjoying a short-term boost from news of planned infrastructure investment in China.

Over recent weeks, iron ore has been edging further back towards government forecasts of $US55 a tonne, offered in the May Budget. Officials in Canberra will be hoping the export can manage to hold around this level, given any sustained drop would weigh on government revenues.

Despite the dip, the commodity has spent the year so far substantially above the trough below $US40 it reached in December 2015, offering some respite to major and junior miners.

RBC Capital analysts yesterday noted the iron ore’s price strength, saying it would drive value support for Rio Tinto and upgrading their recommendation on the stock to outperform.

In London trade, Rio Tinto shares jumped 1.5 per cent, while BHP Billiton rose 1.7 per cent.