Iron ore price tumbles to six-year low

LONDON (ShareCast) - The price of Iron ore has tumbled to its lowest level in six years as lacklustre growth in China continues to hound the market. Feedback (LSE: FDBK.L - news) from industry price aggregators indicates that benchmark iron ore for immediate delivery to Chinese ports was trading at $54.50 per tonne on Friday, barely moving from its overnight close. The stated price level was last seen in the first half of 2009, and is 70% below its 2011 peak.

China, the world's largest steel manufacturer, continues to reduce its imports of iron ore which is a key component in steelmaking. The price slump has escalated into a political row in Australia which is heavily reliant on iron ore exports to China.

While the Australian government has lowered its iron ore price forecast from $63 per tonne to $60, market commentators have been even more pessimistic. For instance, analysts at UBS (NYSEArca: FBGX - news) expect a steeper decline in prices to $50 per tonne. HSBC and Barclays (LSE: BARC.L - news) also maintain similarly negative outlooks.

Many commentators still view the 2011 peak, after floods in Australia caused temporary closures of mines, to be an aberration. The closures along with the post-Fukushima construction works in Japan lent support to the price.

However, West Australian Premier Colin Barnett has blamed the mining companies of creating the oversupply scenario. Rounding up on mining heavyweights BHP Billiton (NYSE: BBL - news) , Vale and Rio Tinto (Xetra: 855018 - news) , Barnett told ABC Radio that their reading of the market situation had been "dramatically wrong".

"They have been putting too much iron ore into the market and...precipitated a continuing downward trend in iron ore prices. This has been one of the dumbest corporate plays I think I've ever seen," he added.

Barnett also alleged that Brazilian exporters had done the same and contributed to the oversupply. The mining companies have not responded directly to the comments so far.