Downturn in iron ore consumption will hurt BHP Billiton and Rio Tinto's bottom line

Falling iron ore prices prompted Australian miners BHP Billiton and Rio Tinto to lower their expected earnings this year. Investment bank Goldman Sachs has joined in pushing the price of Australia's most lucrative iron ore export to $ 80 /t over the next 2 years.

Rio's forecast for a 9 percent decline in revenue from 2014 to 2016 suggests that lower iron ore prices will be offset by increased production and reduced economic costs. Perhaps the company will be engaged in diamond drilling and the extraction of rare earth metals.

The outlook for BHP was neutral on the back of a gas price update and diversification providing partial displacement of iron ore and coking coal. Fortescue Metals data was also downgraded to a neutral forecast. Atlas, meanwhile, has been downgraded as it benefits from exploration success, but experts have concerns about its ability to finance another phase of growth amid lower iron ore prices.

The main driving force behind the decline in the cost of iron ore was the flooding of the market due to a decrease in its consumption by Chinese production. Like other commodities, the price of iron ore could fall below the market's expectations. Experts say that in the short term, the growth rate of steel production in China is expected to slow down and this will leave an imprint on iron ore prices, which, ultimately, should affect the slowdown in the supply of iron ore.