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Global iron ore surplus seen by World Bank lasting two years

According to the World Bank, if history is any guide the global glut in iron ore may persist for as long as two years which forecasts that the steel making raw material will average USD 75 per tonne this year.

Mr John Baffes, a senior economist at the lender said that “From experience from earlier iron ore episodes as well as other metal markets, it takes about one to two years for either excess supplies to get back to normal levels or excess demand to be met by larger supplies”

Mr Baffes, who’s worked at the bank for more than two decades said that “Weak economic growth prospects in the global economy is the key reason behind the weakness of most industrial commodity prices, including iron ore. China may grow 7.1% in 2015 down from about 7.4% in 2014.

Morgan Stanley forecasts that the glut will rise through to at least 2018. China’s economy, which consumes about two thirds of iron ore transported by sea, slowed last year to the weakest pace since 1990.

Iron ore tumbled 47% in 2014 and extended losses this year as surging low-cost supplies from producers including Rio Tinto Group and Fortescue Metals Group Ltd outpaced demand growth in China, spurring the surplus.

Source – Bloomberg

Mar 10, 2015 11:38
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