Iron ore hits a new six-year low

The price of iron ore has dropped to a six year low.

On Friday night, the benchmark iron ore price fell to $US58.20 a tonne, down almost 2 per cent to a fresh low not seen since 2009.

The steelmaking ingredient has now lost around 20 per cent of its value since the start of 2015, and more than 60 per cent since the beginning of 2014.

The slump has been blamed on decreasing demand out of China coupled with a surplus in the amount of iron ore being produced globally.

These low prices render many junior producers unprofitable and led to BC Iron, Atlas Iron and Mount Gibson being dropped from the ASX200 last week.

On Friday, Rio Tinto said the oversupply will continue for the rest of the decade and lead to the exit of high-cost producers.

"The continued ramp-up of committed supply is expected to once again exceed the growth in iron ore demand in 2015," the miner said in its annual report.

“The demand outlook for iron ore remains sound with expected contestable iron ore demand growth in excess of 100 million tonnes a year by 2020.”

"However, with further exits of high-cost producers anticipated, the market will be more in balance.”

The continued fall of iron ore comes as China revised its growth forecast to just 7 per cent.

This means the world’s biggest importer of iron ore will transition away from the fast-growing model of development to a more moderate scheme.

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