http://www.theaustralian.com.au/business
IRON ore prices will fall to as low as $US75 a tonne next year and begin knocking out Australian sources of supply, a leading commodities analyst has warned.
Ian Roper, a former analyst with Rio Tinto who now works out of Shanghai for CLSA, has made further cuts to his iron ore price outlook in response to a stronger than expected ramp-up in supply by Australia’s iron ore miners.
Mr Roper now expects the iron ore price to fall to $US75 a tonne by September 2015, compared to his previous forecast for prices to drop to $US80.
The benchmark iron ore price has already fallen by more than 37 per cent this year to around $US87.10 a tonne.
While smaller iron ore miners are hoping that high-cost Chinese iron ore production will put a floor under the price and stop the price slide, Mr Roper argued that prices would continue to fall and flagged closures would spread to international iron ore suppliers including Australia.
He said iron ore was likely to follow a similar path to the coal price, which has been hovering at lows for two years as marginal mines battle to stay in production. Mr Roper also argued Chinese steel mills would be reluctant to shut their own iron ore production capacity.
“After already losing capital in mine investments, would Chinese steel mills be willing to cut their losses and become dependent entirely on seaborne supply from the major low-cost mines?” he asked.
“Surely it is more likely that they will retain bitter memories of the pain they have suffered at the hands of the iron ore oligopoly and be willing to support their own captive supply even at a loss.”
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