The iron ore price plunge continued over the Easter long weekend, with the commodity hitting a new low of $US46.70 a tonne.
This is 4.9 per cent lower than the commodity’s previous low of $US49 a tonne and marks a 24 per cent decrease in the price of iron ore since the beginning of March.
Atlas said the extent and pace of the decline in the price of iron ore had led to the review which will include its financial outlook, asset sale opportunities and capital structure.
With the price of iron ore trading at lows not seen for almost a decade, only major miners BHP Billiton and Rio Tinto are still making money.
Atlas Iron's breakeven price is $US64 per tonne.
But it is not only junior miners that will feel the pain of iron ore’s fall from grace.
Deloitte Access Economics partner, Chris Richardson said Australia had “bet the house” on its reliance in Chinese demand.
With growth in the country declining to levels not seen in 15 years, Richardson said the Australian economy had been “wrong-footed”.
Official Australian government forecasts predicted an iron ore price of $US60 a tonne, and Richardson said for every dollar the commodity fell below this level, national income fell by around $800 million and tax revenues declined by between $250 million and $300 million annually.
So far the federal budget revenue downgrade is $9 billion over two years.
According to economist Ross Garnaut, the price of iron ore is set to keep falling until major producers – Rio Tinto, BHP Billiton and Vale – cut production.
He said the “tsunami’ of new supply by the big miners and sluggish Chinese demand has led to the price free fall.
Garnaut said the price would be further impacted by declining steel production in China, which he says will drop to 600 million tonnes by 2030.
This is at odds with predictions by BHP and Rio which have stated that by 2030 China will be producing one billion tonnes of steel.
The big miners have balked at suggestions they should cut back production in order to give the price of iron ore a chance to recover.
BHP’s iron ore boss Jimmy Wilson said the industry had to accept the fact that demand has flattened.
“At the end of the day we are in a commodity business which goes through commodity cycles,” Wilson said.
“I didn’t hear too many people complaining when the price was going up, but certainly there’s a lot more complaining when it’s coming down.”