Iron ore is getting smoked

Iron ore is crashing.

The spot iron ore price was smashed overnight, suffering the largest one-day percentage loss seen in over a year.

According to Metal Bulletin’s iron ore index, the spot price for 62% fines slumped by $3.57, or 6.03%, to $55.63 a tonne. The decline was the largest seen since May 30 last year.

With Australia’s economy highly dependent on resources exports, every $1 fall in the iron ore price costs the federal government hundreds of millions of dollars in lost revenue.

Since hitting a multi-month high of $65.61 on June 11 the spot price has now fallen by 15.2%. From the beginning of 2015 the decline extends to 21.9%.

On Wednesday China’s steel industry PMI for June, a report on overall activity levels for Chinese steel makers, plunged to 37.4 from 42.4 in May. A figure of 50 is considered neutral, meaning conditions in June deteriorated sharply.

Such a decline was always likely to place pressure on iron ore and coking coal prices. It seems that’s already being felt.

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