http://www.theaustralian.com.au/business
A PROMINENT Chinese fund manager has grimly forecast that the global iron ore price could remain under pressure for 10 years as oversupply continues to hit the market and the Chinese residential property market slumps.
Shanghai Jianfeng vice-president Liang Ruian believes prices could slide below $US60 a tonne within the next year and could even fall to as low as $US50 a tonne, with major consequences for miners around the world.
The iron price on the weekend was $US71.32 a tonne, up $US1.34, but the commodity is down more than 50 per cent this year. The price slide has prompted miners to rethink capital expenditure plans and intensifies pressure on companies struggling to bring projects to the production stage.
Mr Liang, a well known fund manager in Shanghai, said the price of iron ore would be heavily affected by the performance of the domestic Chinese real estate ¬market.
About 30 per cent of China’s steel output is used in residential development, which is forecast to remain flat in the next few years after a surge following the global financial crisis. It is estimated China now has a nationwide inventory of housing to last up to three years.
“I am pessimistic about the iron ore price because I see the stagnant prospects of the Chinese real estate market which is going to have devastating effects for the steel industry,” Mr Liang told The Australian.
“The inventory of housing is up to a couple of years, while in China the rapid development of the e-commerce market is having a big impact on the sales and rents for the commercial real estate market. I think the golden ten years that we have had in the real estate market in China is over.
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