CANBERRA: Australia’s Department of Industry cut its iron ore price forecast for next year by a third, from the $94 a metric ton forecast in September to just $63, with rising output continuing to exceed demand.
Prices have nearly halved this year as major miners ramped up production, forcing a number of smaller companies to the wall and hitting employment and government tax revenues. On Tuesday, the price of the key steelmaking ingredient fell to $66.84 in China, its lowest level since June 2009.
According to Bloomberg Intelligence, 22 iron ore projects have been canceled or suspended since July in response to the low prices, eliminating an estimated 140 million tons of extra capacity. However, more than 100 million tons of new capacity has entered the market during the same period, with an estimated 340 million tons extra forecast over the next five years, mainly from Australia and Brazil.
China buys two-thirds of global seaborne iron ore but is set to produce its weakest annual growth since 1990, with a slowing real estate sector also reducing demand. China’s steel consumption is estimated to have risen by 1.5 percent in 2014 compared to its post-global financial crisis average of around 10 percent a year, hit by the downturn in residential construction that accounts for nearly half of its steel use.
While ANZ forecasts the iron ore price will average $80 a ton in 2015, JPMorgan predicts $67 and Citigroup as low as $60, according to Bloomberg News.
