Fortescue Metals suffered a massive loss yesterday, during Australia’s worst trading session in a month.
Investors rushed to offload mining stocks causing the price of iron ore to fall to its lowest since June 2013, and a 22 per cent slide from 12 months ago.
FMG was one of the hardest hit, with share prices tumbling 9.4 per cent, knocking more than $500 million from chairman Andrew Forrest’s stake in the company.
The value of Forrest’s share has now declined by more than $1 billion in the past 11 days, due to the falling iron ore price.
RBS analysts have said the iron ore price has fallen 15 per cent this year despite China’s imports having reached a record in January, after Australian and Brazilian producers have spent billions on expanding their output for the Chinese market.
Citi Commodities analyst Ivan Szpakowski said the growing surplus of the material cannot be absorbed by the Chinese steel production market.
''With 2014 and 2015 facing seemingly inescapable surpluses, the question becomes the price needed to force sufficient production curtailments to bring the market back into balance in 2016.''