The iron ore price fell a little over 4% overnight which could weigh on shares of the miners that produce it. And if the Reserve Bank of Australia's latest call proves correct, there could be more pain on the horizon.
The iron ore price has proven far more resilient this year than many in the market expected. In turn, that has had a positive impact on the local economy and likely played a role in boosting the value of the Australian dollar against a basket of other major currencies.
However, officials from the RBA have called the top of the current iron ore price boom with China's production of steel likely to ease from here, according to The Australian Financial Review. At the same time, supply from the likes of BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) could continue to increase.
According to figures provided by The Metal Bulletin, iron ore was fetching US$71.76 a tonne after the latest session. The resource did slip as low as US$71.26 a tonne, which The AFR said was its lowest price in more than a month.
The BHP Billiton share price slipped 0.6% this morning and Rio Tinto dropped 0.9%. The Fortescue Metals Group Limited (ASX: FMG) share price is also trading 1.9% lower at the time of writing to $5.32, with those shares now sitting almost 27% below their 52-week high of $7.27. The Fortescue share price is down 8.9% over the past week.
Although the likes of BHP, Rio Tinto and Fortescue are among Australia's largest companies, investors may want to take a cautious approach to investing in their shares. While all three could be impacted by further falls in the iron ore price, it's also worth noting that the discount for Fortescue's lower grade ore has been widening, which is likely having an even greater impact on its share price.
