The price of iron ore has struck $US50 a tonne overnight and risks a fall below that level as rising Chinese stockpiles and a talk of a lift in marginal supply drag on sentiment.
At the end of the latest session, iron ore delivered to the Port of Tianjin in China slipped 0.4 per cent to $US50 a tonne.
The commodity has lost 12 per cent through a run of five sessions without a gain, with much of the pain stemming from news stocks at iron ore ports in China had recently risen above 100 million tonnes for the first time in over a year.
The development raised the prospect of flagging demand over coming months.
Iron ore now trades at its lowest mark since the end of February and the recent surge to almost $US70 a tonne is long forgotten as miners reassess the market outlook.
The downturn will be causing consternation in Canberra given the Federal Government recently backed in Treasury forecasts of $US55 a tonne for the 2016-17 Budget.
As it stands, hundreds of millions have been wiped from potential revenue since the price forecast was made.
Adding to the soft sentiment is the recent rebound in the US dollar as the Federal Reserve hints at an imminent rate hike.
A strong US dollar makes US dollar-denominated commodities more expensive for holders of other currencies.
The fall to $US50 a tonne broadly matches the median forecast from analysts and follows a warning of prolonged pain from Macquarie analysts, even if its near-term forecasts were raised this week.
“Spot iron ore prices rose an impressive 78 per cent or $US30/tonne in just 100 days from mid-January to late-April, surpassing both our and market expectations. Stronger steel demand in China and supply cuts from the majors were the key drivers behind the price rise, and while prices may have overshot briefly, we believe ... prices around $US55/tonne are clearly justified by fundamentals,” the group’s analysts said in a note.