Why Rio Tinto stock prices down 8/30/2012

Why Rio Tinto stock prices down 8/30/2012 : Mining giant Rio Tinto Ltd's stock has fallen to a three-year low as the iron ore price continues to decline on the back of China's slowing economy. At 1237 AEST, Rio's stock had lost 3.91 per cent $48.55 against a benchmark index fall of 1.01 per cent after the iron ore price on The Steel Index hit a fresh two and a half year low at $US90.30 per tonne.

The Australian Financial Review said Steel mills were continuing to purchase only as much as they need to maintain minimal blast furnace production from nearby stockpiles.

Falling commodity prices have sparked renewed concerns that Australia’s terms of trade could actually stop growing in the remainder of 2012, putting pressure on budget forecasts and the expected tax take.

Macquarie analyst Graeme Train said the price could fall as low as $US80 a tonne if Chinese steel mills continued to reduce their stock and steel demand and pricing remained weak.

Rio's rival BHP Billiton slid 2.96 per cent to $32.02.

Australia's third biggest miner, Fortescue Metals Group Ltd was at a two-year low, down 2.88 per cent to $3.545.

Mining services are also being hit by negative investor sentiment surrounding the sharp adjustment in commodity prices, with Boart Longyear, which cut its guidance today, also taking a hit to its share price.

The group's shares hit a record low since its 10-for-one share consolidation in May 2010, falling 33.03 per cent to $1.57.

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