Iron ore SMOKED: Biggest ever one-day price fall, hits new record low

Photo by China Photos / Getty Images.

Iron ore prices are in freefall.

According to Metal Bulletin’s iron ore index the spot price for 62% fines has dropped 10.1%, the biggest daily fall on record, to $44.59 a tonne. It’s now down 25% in just seven days. Here’s the chart:

The price collapse is being driven by two main factors:

  • Evidence that supply is continuing to increase out of the world’s biggest producer countries, Australia and Brazil, and
  • Concern that Chinese demand is tanking as the economy slows.

Add in to this the mounting concern about the potential fallout from the Chinese stock market rout and it’s a crushing environment for iron ore producers.

Economists estimate that each $1 fall in the iron ore price results in around $300 million in lost tax revenue for Australia. So today’s fall alone of $5 in the price equates to roughly $1.5 billion being knocked off the budget bottom line.

The sharp and sudden decline will raise fresh questions about the viability of some iron ore miners.

Fortescue Metals Group fell 6% on the ASX today following yesterday’s 8% fall in the ore price. Investors will be taking a close look at the stock tomorrow.

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.