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Why BHP Billiton Limited has dropped 1.3%

BHP Billiton Limited (ASX: BHP) is one of the many iron ore stocks acting as a drag on the overall S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) today. The stock is down 49c or 1.3% at $37.59 a share while the market has dropped 36.4 points or 0.7%.

Overnight, iron ore fell to just US$100.70 a tonne. It is now down more than 25% on the average price the commodity traded at throughout 2013, at roughly US$135 a tonne. While BHP Billiton will remain profitable at this price (it maintains a breakeven price of around US$45 a tonne), the dramatic drop will still heavily impact overall earnings.

The fall in price is being exacerbated by the slowing demand growth from countries like China, as well as increased production rates by Australian and Brazilian miners. BHP Billiton is expecting to produce 217 million tonnes of the commodity this financial year.

BHP Billiton’s largest rivals Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) are down 2% and 2.3% respectively, while Mount Gibson Iron Limited (ASX: MGX) and Arrium Limited (ASX: ARI) have fallen 1.1% and 2.1%.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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