Credit Suisse has destroyed its iron ore forecasts:
High cost production must be forced out: 2016 might well be tougher than 2015
Our demand analysis has steel production declining in China over the next three years, which reduces the seaborne iron ore demand. But our supply forecast for the major iron ore producers has changed very little from our previous forecast.
2015 is not hard to balance as China domestic tonnes and small, marginal producers from “other” unimportant iron ore provinces are falling away.
2016 and 2017 look more difficult to balance as the four major miners expand output by 50Mt each year, but the most marginal tonnes will have exited the previous year. Another period of aggressive prices will be needed to clear away tonnes in the new marginal cost position.
They even add some sanity for miners with BHP profits down 36%, Rio Tinto down by 50% and losses at FMG.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
