The Department of Industry, which replaced the now defunct Bureau of Resources and Energy Economics (BREE) as the official commodity forecaster, has heavily downgraded it iron ore price forecast next year to $US63 a tonne, from $US94 a tonne in September. Below are the key extracts from the quarterly report:
A rapid increase in the supply of iron ore combined with moderating demand growth in China resulted in the price of iron ore falling 50 per cent in 2014. The price of iron ore (FOB Australia) has averaged US$90 in 2014 but as of mid-December is trading around US$70, the lowest level since 2009… 2014 has been characterised by a prolonged price decline without the seasonal rebounds seen in previous pricing cycles. This change in the pattern of prices is likely evidence of a structural change in the iron ore market. The recent surge in iron ore availability has reduced the supply risk steel mills in Asia previously faced and, subsequently, buyers are no longer stocking up ahead of periods usually affected by seasonal factors. As a result prices have not rebounded for any significant period of time in 2014…
