The benchmark price fell into double figures for the first time since 2009, writes Peter Ker.
Timing, they say, is everything and the benchmark iron ore price certainly picked a sensitive moment to stage a mini-collapse.
Debate over the mortality of the mining boom had run wild in the 36 hours since BHP Billiton mothballed more than $60 billion worth of growth projects on Wednesday.
More than $50 billion of those projects had been planned for Australian soil, prompting the nation to seriously contemplate life beyond the boom.
Just when it seemed that every last punter had thrown their two cents into the debate, the iron ore price decided to have its say.
In a major drop, the price shed 5 per cent yesterday morning, dropping from $US104 ($99) per tonne to $US99 per tonne.
It was the first time the benchmark price has dropped into mere double figures since December 2009, sending a chill through the hearts of Treasury officials and ASX-listed companies that rely on high iron ore prices for their financial health.
Pure-play iron ore stocks felt the pain instantly on their share prices, Atlas Iron, Fortescue Metals Group and Flinders Mines all shedding 6 per cent of their company values.
The large, diversified miners did not escape either. Rio Tinto (which relies on iron ore for close to 80 per cent of its profits) lost 4 per cent of its company value and even BHP shed 1.5 per cent.
It was a sensational climax to seven weeks of falls after slowing construction activity and an oversupply of steel in China and the diversion to Asia of iron ore cargoes that were originally bound for Europe.
According to the UBS resources analyst Glyn Lawcock, there could be more pain to come. He said the price had the potential to slip below $US80 per tonne.
"Now that it has broken through $US100 per tonne, traders I speak to think the price could get a seven in front of it," he said.
"We may not see a pick-up in demand until after the holiday season in October, which means the iron ore price just drifts until then."
But Lawcock said he expected the slump to be temporary because many big projects in China had been approved in the June quarter and were still going through the tendering phase.
He said he expected construction activity on those projects to get under way in earnest in the December quarter, sparking a recovery in the iron ore price.
"Our view is that it will be higher by year's end. We think it will probably be back above $US120 per tonne by Christmas," he said.
Most analysts have long believed that a virtual floor exists beneath the iron ore price somewhere about $US120 per tonne.
That price is where a large number of high-cost Chinese iron ore producers have their break even point. Since they typically supply about 30 per cent of China's iron ore needs, most analysts have long believed the price could not dip below the "floor" for long.
The ANZ commodities expert Natalie Rampono said the current dip below $US100 did not mean the floor theory was incorrect.
"We still think $US120 per tonne is the floor price for iron ore. Prices have the ability to punch through that floor price but only on a short term basis, like one or two months," she said.
"In the near term, prices could slip lower to $95 per tonne but we don't see it sustaining those levels ... Demand has eased but we think it will rebound as soon as the China steel supply overhang is wound down, and that could occur over the next six months."
ANZ predicts that the iron ore price will average $US134 per tonne during the 2013 calendar year.
Fortescue, in particular, will be hoping the floor theory holds true for the next couple of years at least, as it will rely on revenue from iron ore sales to pay down its massive debt pile. The company has attracted an army of short-sellers - inspired by the US hedge fund manager Jim Chanos - who are betting against the theory.
The chief executive of Fortescue, Nev Power, was certainly staying positive on Thursday - he insisted that stockpiles of iron ore in China were getting low, which would mean buyers would soon return and lift the price back up to a range between $US120 per tonne and $US150 per tonne.
Benchmark iron ore prices have long been expected to start their terminal decline around 2014 as companies like Fortescue, BHP, Rio and Atlas bring huge volumes of extra exports into the market. But BHP's cautious move this week has emboldened those who insist that the promised wave of new projects will not be delivered in full.
By mothballing its $US20 billion outer harbour development and focusing on improving supply from the inner harbour at Port Hedland, BHP is likely to bring an extra 40 million tonnes into the market in coming years, rather than an extra 100 million. Analysts believe most of the smaller aspirants not yet in production will now struggle to ever bring their projects into operation, further undermining the supposed "wall" of new supply that is due in 2014.