Iron ore price slump rings federal budget alarm bells

The single most important indicator of the underlying health of federal budget revenue – the iron ore price – has collapsed to its lowest level in almost 18 months, according to the Australian Financial Review.

In a dramatic move that will be sending jitters through Treasury just as it finalises a mountain of critical forecasts for tomorrow’s budget, the benchmark price has tumbled over the past four weeks by almost 20% and last traded on Friday at $US102.70 a tonne.

If it continues, the slump could force the government to rip billions from the nation’s anticipated revenue streams.

Time lag on tax reform frustrates Rio chief

Rio Tinto CEO Sam Walsh says the Abbott government should be given time to reform Australia's carbon and mining taxes, and described the nation's bicameral political system as anomalous, according to the Sydney Morning Herald.

Rio was a loud campaigner for reform of both taxes during the term of the Labor government, and has eagerly awaited their removal under the Coalition.

But eight months since the federal election, both taxes remain in place, with Mr Abbott's desire to remove them frustrated by the Senate.

Walsh said he and the industry were mindful of that.

“You would always like for it to be quicker, but you've also got to understand that until the government has control of the Upper House it is going to be hard work,” he said.

ArcelorMittal’s loss less than expected

ArcelorMittal, the world’s biggest steel maker, reported a 12% gain in first-quarter profit to record a loss of $US200 million, and reiterated its earnings target for the year as a revival in European demand countered a slump in Russia and Ukraine, according to the Australian Financial Review.

Earnings before interest, taxes, depreciation and amortisation rose to $US1.75 billion from $1.57 billion a year ago, Luxembourg-based ArcelorMittal said in a statement. That beat the $1.7 billion average estimate of 14 analysts surveyed by Bloomberg. Sales rose 0.2% to $19.8 billion.

ArcelorMittal has shuttered plants and fired workers to cope with an industry trough, after dwindling demand and excess capacity eroded profit margins. The company forecast in February that profit would rise 16% this year as demand rebounded in the US and Europe, its biggest markets.

“Today’s figures continue to show the improved year-over-year performance of our business driven by recovering steel markets,” CEO Lakshmi Mittal said in a statement.

“The prospects for growth of our core markets in Europe and the US are encouraging and overall we remain cautiously optimistic about the business outlook for the rest of 2014.”