Iron ore falls for fourth day in a row

The iron ore price has dropped for the fourth time in four trading sessions, losing 2.7% overnight to take the spot price to US$61.09 a tonne and more falls are very likely.

Since April 21, the price has dropped 13.3%.

But despite the falls, iron ore miners’ share price are mostly up…

  • Fortescue Metals Group Limited (ASX: FMG) shares are up 5.9% at $3.24
  • BHP Billiton Limited (ASX: BHP) share price is up 4% at $20.46
  • Rio Tinto Limited’s (ASX: RIO) share price is up 3% at $49.92
  • Atlas Iron Limited (ASX: AGO) is up 4.4% at 2.4 cents
  • Gindalbie Metals Ltd (ASX: GBG) is up 4.8% at 2.2 cents
  • Mineral Resources Limited (ASX: MIN) is up 1.4% to $7.13

Just Mount Gibson Iron Limited (ASX: MGX) has seen it share price sink – down 4.6% to 21 cents.

Fortescue and Atlas’s share prices are likely being supported thanks to recent good news from both miners – Fortescue paying down more debt, and Atlas finalising a finance package to keep itself afloat.

But they may not see their share prices rise for much longer – particularly if the iron ore price continues to sink – which many observers suggest is the most likely case. Recent action by Chinese officials to clamp down on speculative trading in iron ore futures only adds to the likelihood of further falls ahead.

Indeed, Chinese iron ore futures were down again overnight by 1.9%, suggesting iron ore is headed for its fifth consecutive session of falls tonight.

Foolish takeaway

Nobody predicted iron ore prices would hit US$70 a tonne, or anywhere near that this year, and while it was brief, it also shows that no one can predict commodities prices out into the future – making it rather difficult to value mining companies.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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