Chart of the week: iron ore plummets to a decade low

Iron ore, the main ingredient in steel, has suffered a nasty slump, with the price plummeting below $50 a ton.

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Iron ore, the main ingredient in steel, has suffered a nasty slump. Prices for iron ore delivered to the Chinese port of Qingdao have plummeted below $50 a ton (see chart), the weakest level since the data series began in 2008. Projecting the series further back suggests prices are at a ten-year low.

A rapid recovery is not on the cards. Demand from China has slid as its credit and property bubble have deflated. It would take a major stimulus, as opposed to recent micro-measures, to reverse this trend. Hence global consumption will fall this year, for the first time since 2009, reckons Deutsche Bank.

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However, the flood of new supply from major miners such as Rio Tinto and BHP Billiton shows no sign of reversing just yet: they say they want to sell as much as possible for now, and would only start making losses if prices fall to $30 a ton.

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