Australia’s largest miner BHP Billiton Limited (ASX: BHP) fell as low as $37.36 today after closing at $37.80 yesterday, as iron ore continued to tumble in price while fresh concerns also arose out of China.
Iron ore, which is BHP’s primary revenue generator, fell 0.8% overnight to its lowest level in months at just US$116.80 a tonne. Since the beginning of the year, it has deteriorated more than 10% in value which even prompted Citi to downgrade its “buy” recommendation on BHP to “neutral”. Fellow iron ore miner Rio Tinto Limited (ASX: RIO) was also downgraded to neutral due to fears that its margins would be too greatly affected by the falling price.
News from China also revealed that Chaori Solar Energy Science & Technology Co. would become the first Chinese company to default on bond payments, which is a bad sign, while further defaults are likely to occur in the future. As Motley Fool analyst Mike King suggests, such a crisis could see demand for iron ore slow which would heavily impact our miners – particularly as they ramp up their production levels.
In mid-afternoon trading, BHP is down 0.5% and Rio has fallen 0.4%. Fortescue Metals Group Limited (ASX: FMG), on the other hand, has actually risen 1.1%.