Bloomberg reported that Iron ore, the commodity most leveraged to China’s growth and Australia’s biggest export earner, is heading for the longest bear market in 20 years.

Vale SA, Rio Tinto and BHP Billiton, which control about two-thirds of seaborne iron ore supply, are spending about USD 47 billion on new and bigger iron ore mines from Brazil to Australia. The new cargoes are set to reach the global market just as China changes gear to lower growth expectations, following what may become its weakest performance since 1990.

Citigroup Inc said in a report last month “An iron ore surplus looms in 2015 after capacity expansions in Brazil and Australia, the biggest exporters, help boost global seaborne exports by about 35% from 2010 levels.”

Mr Alberto Calderon, chief commercial officer of BHP, said last month at a conference in Canberra “We’re already seeing the beginning of the end of the first phase of economic development in China. The pace of demand for iron ore from China has slowed down by more than half.”

Kieran Davies, chief economist at Barclays Capital in Sydney, said in a note. “The price of iron ore is the canary in the coal mine. It’s seen as an indication of the economic outlook for China and Australia.”

According to Mr Andy Xie, a former Morgan Stanley chief Asia-Pacific economist, prices reached a record USD 191.90 a tonne February 16 last year and may plunge as low as USD 50 a tonne before the middle of next year

They haven’t traded at that level since contract prices were set at USD 47 a tonne in 2006.

Source - Bloomberg

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