Billions of dollars were wiped off the market value of the world's biggest mining companies yesterday after fresh concerns about slowing demand from China prompted one of the steepest falls in the price of iron ore on record.

Benchmark iron ore delivered into China dropped 8.3 per cent to an 18-month low of $104.70 a tonne – its second-biggest one-day percentage fall on record – according to the Steel Index price reporting agency.

Iron ore is critical to the profitability of mining companies such as Anglo American, BHP Billiton, Rio Tinto and Vale. They are spending billions of dollars expanding operations to meet expected demand for steel from Chinese construction projects.

However, if the iron ore price were to stay low for a sustained period of time, it would call into question the ability of miners to fulfil promises of higher returns for shareholders.

Analysts at BMO Capital Markets expect iron ore to generate 58 per cent of the pre-tax profits made by the seven largest diversified miners this year.

– ( Copyright The Financial Times Limited 2014)