Iron ore prices are careering towards what one mining industry executive previously dismissed as “fantasy land” territory – and some analysts have warned it could fall even lower.
Mining companies have been pummelled by low mineral and metal prices, forcing them to restructure their business models and scrap dividends.
Iron ore prices are currently at $41 a tonne, down 12.8 per cent from last month's $47, and 38.7 per cent from a year ago. It's coming closer to $30 a tonne, a level previously described by Rio Tinto's chief executive, Sam Walsh, as "fantasy land". He cautioned it wouldn't be able to remain there long, due to the large number of mines which would be forced to close.
Some analysts have warned iron ore prices could actually fall below the $30 a tonne. In December, a poll by Reuters revealed many thought that it could dip below this level in the coming months. This was echoed by Capital Economics, which said this could happen as low-cost supplies rise further.
Copper prices are also heading towards a level feared by another mining exec. They're currently hovering at $4,600 a metric tonne, down 3.36 per cent from a month ago, and 28 per cent from a year ago. Glencore's Ivan Glasenberg previously said copper below $4,000 a metric tonne was its "doomsday" price.
Iron ore prices ended down for the third year straight in 2015. The steelmaking commodity has been battered by a slowdown in the Chinese economy, its largest consumer. This has been compounded by the biggest miners ramping up production, to defend and even boost their market share.