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Australia’s iron ore prices hit by commodity slump

MELBOURNE — Australia estimates iron ore will trade at about US$60 (S$78.80) a tonne as the biggest slump in the nation’s terms of trade since records began more than 50 years ago deepens the budget deficit.

MELBOURNE — Australia estimates iron ore will trade at about US$60 (S$78.80) a tonne as the biggest slump in the nation’s terms of trade since records began more than 50 years ago deepens the budget deficit.

The price of the material used to make steel has almost halved this year and slumped to a five-year low of US$68.49 a tonne last month, showed data compiled by analysis firm Metal Bulletin. That compares with a US$92 projection for the budget, Treasurer Joe Hockey said in a televised press conference yesterday.

“We are forecasting that it’ll remain around US$60 a tonne for the foreseeable future,” he said in Sydney. The decline in the price of iron ore has had a big impact on the budget, as had a 15 per cent fall in thermal coal and 20 per cent fall in wheat prices, he said.

Australia will deepen cuts to the civil service as agencies are axed in search of savings after Mr Hockey said on Friday that the mid-year economic and fiscal outlook tomorrow will show a wider budget deficit than initially projected. Iron ore accounts for about 20 per cent of the nation’s export income, Finance Minister Mathias Cormann has said.

Iron ore may fall to less than US$60 a tonne next year as the largest mining companies press on with expanding supply, deepening a glut just as demand growth in China falters, said Roubini Global Economics. Bloomberg

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