JOHANNESBURG (miningweekly.com) – The iron-ore price on Singapore's most active iron-ore futures market was below $40/t for the first time, Investec noted on Monday, when it reported that additional iron-ore supply was about to be shipped from Gina Rinehart’s new Roy Hill iron-ore mine, in Australia.

Quoting Bloomberg, Investec said the SGX AsiaClear contract for January fell 2.6% to $39.74/t and futures for May delivery sank 3.1% on the Dalian Commodity Exchange to 293 yuan ($45.81/t) – a record low.

Investec described the iron-ore price fall as “sobering”, but unlikely to be “long lasting”.

“We would expect production cuts if the prices fell below this level, given that even the major producers like Vale and Fortescue have breakeven costs around $40/t,” Investec added.

However, the expectation of London mining analyst firm Liberum Capital is that the price of iron-ore will fall into the mid-$30/t range over next 12 months, with this low price environment in turn putting major pressure on South Africa’s 14 000-employee Kumba Iron Ore, which requires a breakeven price of $45/t.

Liberum Capital analyst Ben Davis outlined further in a video link that any attempt to shut Kumba would not only fall foul of South Africa’s political unemployment sensitivities but also put controlling company Anglo American’s other South African assets at risk.

Against that background, Liberum foresaw Anglo American potentially incurring substantial cash losses before being allowed to curtail Kumba, which persuaded the firm to recommend a sell-off of the shares of the iconic London- and Johannesburg-listed diversified mining company.

Liberum calculated that Kumba’s $45/t breakeven price would be $6/t higher than Fortescue’s $39/t, which had caused it to overturn its previous contention that the Australian company would be the sector’s first casualty.

“For us, Anglo is now going to be the one that has to exit the market first,” Davis said.

The firm also saw a probable widening of Kumba’s $6/t breakeven distance from Fortescue, owing to Kumba no longer being in line to receive lump premiums higher than $8/t – compared with up to $25/t in the past – and Fortescue leaving its low-grade past behind it.

Investec also reported the imminent shipment of iron-ore from the new Roy Hill iron-ore mine on a Capesize carrier, scheduled to be loaded with the first shipment.

The bulk of Roy Hill’s output is under long-term contract to the mine’s Asian partners, Posco of South Korea, Marubeni of Japan and China Steel of Taiwan, Mining Weekly Online can report.