Iron ore under US$60 - lowest since 2009

The glut is tipped to double to an 85-million-tonne high.

Iron ore sank below US$60 ($81) a tonne after China set the lowest target for economic growth in more than 15 years, highlighting the slowdown in the largest buyer as low-cost supplies expand further amid a glut.

Ore with 62 per cent content at Qingdao retreated 3.6 per cent to US$59.73 a dry tonne on Thursday, according to Metal Bulletin.

The price, which declined for a third day in the longest losing streak since late January, is at the lowest level since at least May 2009, when the daily pricing series started.

Iron ore extended losses this year after falling 47 per cent in 2014 as miners including Rio Tinto Group increased low-cost supply just as China slowed. China's growth target of about 7 per cent, down from last year's aspiration of about 7.5 per cent, was given in Premier Li Keqiang's work report at the annual meeting of the legislature in Beijing.

Citigroup raised the prospect of sub-US$60 iron ore in November, and is among banks that cut price forecasts further since January.

"The lower growth target is weighing on sentiment," said Wu Zhili, at Shenhua Futures in Shenzhen, China. "The Government also asked some steel mills to cut output in their bid to curb pollution. This may reduce demand for steel-making raw materials such as iron ore."

Rio's shares dropped 1.2 per cent to A$60.39 ($63.31) at the close of trading in Sydney on Friday. The stock is 6.2 per cent lower this week, while BHP fell 3 per cent in the period and Fortescue declined 14 per cent.

China accounts for more than two-thirds of global iron ore imports.

Economic headwinds include a property slump and excess industrial capacity. While the government has vowed to move away from expansion at all costs, the central bank cut interest rates for the second time in three months to support growth.

"Given China's size, 7 per cent growth is still a strong rate ... , " said Paul Bloxham, chief Australia economist at HSBC Holdings in Sydney.

"We see the current level of iron ore prices, of around $60 a tonne, as around the low point for the price, and expect prices to stabilise around this level before potentially lifting."

Crude-steel output in China expanded at the weakest pace last year in 24 years. Peak steel arrives in China this year, according to Morgan Stanley, which forecast that production and consumption of the alloy will decline after 2015 as the economy matures.

The iron ore glut would double to a record 85 million tonnes this year, Australia & New Zealand Banking Group said last month.

The surplus will surge to 437 million tonnes in 2018, according to Morgan Stanley. Additional supply is coming as Rio, BHP Billiton and Vale bring on more capacity.

Rio chief executive Sam Walsh said last month that if his company cut iron ore output after prices fell, forfeited supply would be made up by rivals with higher costs.

"The global surplus looks likely to get worse this year as the major producers go on expanding," said Wu.

Sub-US$60 iron ore this year was also forecast in December by Roubini Global Economics. Australian Treasurer Joe Hockey said the Government was forecasting prices would remain about US$60 for the "foreseeable future".

In a hole
*Iron ore last week dropped below US$60 a tonne.
*The commodity fell 47% last year.
*Miners have increased low-cost supply just as China slows.
*China has set a 7% growth target - the lowest in more than 15 years.