Iron ore hits lower circuit

The most liquid iron or future in China's Dalian commodity exchange hits the lower limit today. It fell further in the after hour trading. It's currently trading at Renminbi (Rmb) 460 per ton.

It's extremely cheap -

• Doing the math - Rmb 460/ ton is nothing but $ 0.073/kg at current exchange rate of Yuan 6.27 against dollar. That is extremely cheap, way cheaper than potatoes. 

Indication -

• Seems like no respite for global inflation.
• Slowdown in China could be greater than anticipated. The country consumes about 50 percent of the global production.
• China's downgrade of growth forecast to 7 percent today, is contributing to the fall.
• Supply side remains robust.

Impact -

• Further bad news for Australia and its dollar, as it is one of the top export.
• Similar supply glut and demand drought could exist in other large consumables of China namely copper, aluminum, zinc etc.