THE value of iron ore, Australia’s major export earner, is set to plunge by more than half next year, with as much as $US54 billion ($63bn) to be wiped from the industry’s revenue compared with what could have been received had last year’s elevated prices prevailed.

The revenue punch — it would also mean the federal government misses out on more than $US15bn in tax receipts — is fast becoming a fait accompli in response to iron ore’s 44 per cent price crash so far this year to $US75.50 a tonne, and an increasing line-up of forecasters predicting iron ore will go lower still next year.

The suggested $US54bn revenue hit is based on forecast production next year of 768 million tonnes at a price of $US65 a tonne — the price nominated yesterday by Citi as its average price forecast for 2015 and 2016. That is down from its previous forecast of $US80 a tonne in 2015 and $US78 a tonne in 2016. Either way, both the old and new forecasts are catching up with the recent dive in iron ore prices.

The forecasts also compare with last year’s (calendar) average for iron ore of $US135 a tonne. The $US70-a-tonne difference between last year’s annual average and Citi’s 2015 forecast underpins the suggested $US54bn revenue hit for the industry.

The extent to which tax receipts also cop a battering could be softened by the exchange rate moving lower still, with the currency traditionally seen as commodity-linked.

Joe Hockey acknowledged yesterday that iron ore’s price slump would affect the budget’s bottom line, but did not elaborate.

The bottom-line impact on the iron ore producers is already clear. Share price falls of more than 80 per cent since the start of the year are common among the smaller and higher-cost producers, while the big three of Rio Tinto, BHP Billiton and Fortescue are also down.

The more diversified earnings streams of Rio and BHP see them down by 11 per cent and 10 per cent, respectively, while Fortescue’s total reliance on iron ore has seen its value plunge 48 per cent this year.

All of the iron ore producers traded lower yesterday, particularly the smaller and higher-cost producers, due mainly to iron ore not staging a recovery from last week’s 3.8 per cent price slump to fresh five-year lows. But the sentiment was also hit by the Citi downgrade of its iron ore price forecasts.

Up until recently, the firm had held to the view that restocking in China would see a rebound in prices in the final months of the (calendar) year to $US90 a tonne.

“Demand is weak and supply continues to surge, driving high-cost capacity out of the market, but as with other bulk commodities, this is happening at a lower than expected price due to barriers to exit, foreign exchange and other factors lowering costs,’’ Citi said.

The Citi downgrades followed ANZ’s call on Monday that the party was over for iron ore. “Super high profits enjoyed in the iron ore sector appear to be over. Iron ore prices will not breach $US100 a tonne and the average is now $US78 a tonne for (calendar) 2015,’’ it said.

Unlike Citi, ANZ does not expect prices to fall below $US70 a tonne — a level it said would force the closure of as much as 20 per cent of global iron ore supply.

It is the potential of forced closures that has got the local market worried, with only the big three of Rio, BHP and to a lesser extent Fortescue enjoying comfortable margins.

That was reflected in another sell-off in iron ore shares yesterday. Fortescue fell 4.4 per cent to $3.02. Atlas fell 7.5 per cent to 24.5c, Mount Gibson lost 8.6 per cent to 42.5c and BC Iron fell 5.4 per cent to 86.5c.