From Bloomie:
Iron ore may drop to less than $60 a metric ton next year as the largest mining companies press on with raising supply, deepening a glut just as demand growth in China falters, according to Roubini Global Economics LLC.
The commodity will average $65 a ton in 2015, with weaker prices in the first half before a recovery as some higher-cost capacity is closed, Director of Commodities Helen Henton said in an interview. While producers won’t fare well in an environment of falling prices, it does make sense for low-cost suppliers to keep expanding in the expectation that less-competitive mines will be shuttered, she said.
…“We’re bearish with the commodities complex as a whole, really. It’s the supply side that makes a difference,” said Henton. “Iron ore is one of the commodities where the surplus is most evident.”
…“We’re expecting a bumpy landing, particularly from the end of next year through 2016,” said Henton, referring to China. “There’s a shift to a consumer-led economy rather than investment-led, which will have an impact on metals demand, particularly on the steel industry and therefore iron ore.”
Not bearish enough. From Q3 next Roy Hill and Vale join the flood. High cost production won’t depart fast enough. As I reported earlier today, Roubini is also expecting Chinese growth at 5.4% in 2016, worse, driven by consumption not investment. If that comes true then by that year seaborne volumes will also be falling and iron ore will be at $40. Sorry!
