Iron ore, which plummeted 47
percent in 2014, keeps seeing reduced price forecasts from global banks, like Citigroup, UBS Group AG and now Goldman Sachs, which continue coming in the opening weeks of the year.
In a report dated Jan 23 Goldman Sachs said the steel-making ingredient may average $66 a metric ton
this year from an earlier estimate of $80. This is the first time the New York-based bank has reduced its 2015 prediction since March 2013, and
it’s at least the fifth bank this month to lower estimates,
citing rising seaborne supplies and weaker demand growth from
China, the biggest user.
“Significant overinvestment to date will ensure that the market is well supplied, while demand from the Chinese steel sector is maturing,” Goldman analysts including Christian Lelong wrote in the report. “A painful war of attrition awaits” the iron ore industry as less competitive mines shut, the analysts said.
As Bloomberg reports, the iron-ore surplus emerged last year after the largest miners including Rio Tinto Group (RIO), BHP Billiton Ltd. and Vale SA (VALE5) invested billions of dollars to boost output and as China grew at the slowest pace in more than two decades. Cheaper energy costs and depreciating currencies may delay supply cuts needed to rebalance the market, causing prices to extend losses, said Citigroup and UBS, which pared estimates for the commodity by as much as 22 percent.
Citigroup cut outlook to $58 in 2015 and $62 next year, down from estimates of $65 for both years, according to a report dated Jan. 14. UBS sees the raw material averaging $66 this year, 22 percent less than previously forecast, and $65 in 2016, down 21 percent, and lists iron ore as its least-favored metal, it said Jan. 15.
Goldman said low-cost expansions will probably continue as major
producers are still mining iron ore at a profit.
This will expand the global seaborne surplus from 47 million
tons this year to 260 million tons by 2018, the bank estimates.
