Iron Ore Price Seen Back Below $50 as Australia Expands Supply
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(Bloomberg) — Iron ore is holding above $50. Just don’t bet on it lasting.
Ever-expanding supplies from the world’s largest producers mean prices will fall through the end of the year, according to Capital Economics Ltd. The London-based research firm joins banks including Goldman Sachs Group Inc. and UBS Group AG in predicting lower prices.
The steel-making ingredient will drop to $50 a metric ton at the end of September and $45 by the end of the year, said Caroline Bain, a senior commodities economist at Capital Economics. Ore with 62 percent content advanced 3.9 percent to $56.04 a ton on Friday, according to Metal Bulletin Ltd. It’s 4.9 percent higher this month, having bottomed at $44.59 a ton on July 8.
“The catalyst for the renewed decline will mainly be on the supply side as the Australian producers continue to ramp-up output,” she said by e-mail. Mining giants Rio Tinto Group and BHP Billiton Ltd. are increasing production to boost sales volumes and cut costs, expanding a glut even as China, the biggest buyer, slows.
New Supply
Then there’s new supply due to appear on the market, in the form of ore from Australian billionaire Gina Rinehart’s A$10 billion ($7.1 billion) Roy Hill mine that will come on line later this year, Bain said. Rio Tinto is forecasting new supply will total 110 million tons this year.
Iron ore has got a fillip in recent weeks as steelmakers in China increased output ahead of government-mandated production cuts at some mills to ensure clean air in Beijing for its Sept. 3 World War II victory parade, according to Wu Zhili, an analyst at Shenhua Futures Co. in Shenzhen.
Goldman forecast iron ore averaging $48 a ton in the final three months of 2015, according to a report dated Aug. 14. UBS forecast on Aug. 17 that iron would average $51 a ton in the second half.
To contact the reporter on this story: Jasmine Ng in Singapore at jng299@bloomberg.net To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Peter Langan
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