Further drops in the iron ore price predicted

Monday, 09 February, 2015

Iron ore has lost more than 16% of its value since January after falling by 47% in 2014. However, the worse may be yet to come, with an economist in Shanghai predicting a collapse to US$30 a tonne. On Thursday it had dropped to US$61.64.

Andy Xie, an independent economist, claims that a contracting steel manufacturing industry in China will lead to oversupply as the big three miners - BHP Billiton, Rio Tinto and Vale - pump out record volumes of ore into a flooded market.

“We have a situation of declining demand and increasing supply,” said Xie. “Domestic steel demand in China is actually declining and that trend is going to last a long time.”

However, a recent report suggests a collapse in Chinese production may be hard to come by with the government there working to preserve employment in regional areas, and this means the price will only go one way: down.

Australia’s Bureau of Resources and Energy Economics (BREE) said that while Australia will export a record 747 million tonnes of iron ore in 2014-15, its export value will decrease 24% to $57 billion. BREE cut its iron ore price forecast for 2015 to US$63 a tonne.

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