Australia trimmed its forecast iron ore price for 2015 due to
rising supplies, but still expects a rebound from current five-year lows as
higher cost producers are forced out of the market.
Australia's official forecaster
lowered its 2015 average price to $92.40 a tonne from $94.60 a tonne
previously, well above this week's sub-$80 a tonne levels.
"Over the next five years, iron
ore prices are projected to average between $90 and $95 a tonne," the
Bureau of Resource and Energy Economics (BREE) said in its latest quarterly
update.
"Further increases in supply
indicate increasing price competition will be needed to push more high-cost
supply out of the market over the next two years," BREE said.
The forecast is well below the
$100-$120 a tonne forecast some iron ore miners used in forward price
assumptions to support massive expansion work completed or in progress to
inject tens of millions more tonnes into the sea-traded market.
Mega miners such as Rio Tinto ,
Brazil's Vale and BHP Billiton have been ramping up output despite concerns of
an oversupply as steel output growth moderates in China, the world's biggest buyer of imported ore.
Benchmark 62 percent iron ore for
immediate delivery into China .IO62-CNI=SI fell below $80 per tonne for the first
time in five years this week to $79.40, according to The SteelIndex.
The China Iron and Steel Association
said on Monday it expected iron ore prices to hover around $80 a tonne in the
long term amid limited growth in China's steel output.
While steel production has increased
in 2014, it has failed to absorb the surge in supply.
Credit market conditions in China have
affected end-user demand for steel, leading to lower sales growth and higher
inventory levels.
BREE predicted a number of higher cost
producers, both in China and around the world, will be forced out of the market
over time to reduce the oversupply.
China's domestic industry is
fragmented, with miners in coastal areas suffering under some of the highest
production costs in the country, but many state-owned mines have so far remained
open.
BREE also lifted its forecast for
Australia's iron ore exports in fiscal 2014/15 to 735.3 million tonnes from
720.7 million tonnes forecast in June.
Source: Reuters