Australian-listed miner Rio Tinto has dropped the prices of its low-grade iron ore by 13% from 6%, beginning 1 July, the company informed customers this week.
This would effectively drop the price of iron ore to $73 per tonne from the price of $89, reported Australia’s Herald Sun.
Weak demand from China has caused smaller iron ore producers to cut the price of the commodity with the likes of Termite Resources, which operates the Cairn Hill iron ore project in South Australia, to be placed in administration.
Pressure on smaller producers
The supply-demand imbalance has also affected smaller iron ore producers in China, many of which are pressured to shut down.
A 44% plunge in the price of iron ore from its February 2013 peak has seen 20-30% of mines in China closing, according to the China Metallurgical Mining Enterprise Association.
Rio Tinto Chief Executive Officer Sam Walsh said this month a drop in the price to about $80 would see a lot of his competitors ‘disappear’.
BHP, the world’s third-largest iron producer, has however lost about 8% of its market value, from the 20 February 2013 peak to the 16 June low.
The Australian shares of Rio Tinto, the second biggest producer of the commodity, declined 16%.
Iron ore prices reached a peak of $135/tonne in 2013.