Australia expects iron ore prices to fall by 30% next year

According to the report of Taiwan’s “United Daily News” on December 23, the Australian Ministry of Industry estimates that iron ore prices will fall by 33% next year, mainly because the increase in Australian exports exceeds the growth in Chinese demand, causing oversupply in the market.

The Australian Department of Industry estimates that next year iron ore prices will drop to $63 per metric ton, well below the $94 estimated in September of this year and lower than the average price of $88 per metric ton this year.

Roubini Global Economics pointed out that the mining giants Rio Tinto and BHP Billiton have expanded their production in Australia, causing excess supply in the market. Iron ore prices have dropped by 49% this year. If the output continues to increase next year, China's demand growth will slow down again, and iron ore prices may fall below US$60 per metric ton.

The Australian Ministry of Industry’s report also pointed out that the price of iron ore sand will hover at US$60 per metric ton in the next two years. As China's housing market has entered a cyclical recession, oversupply will spread from 2015 onwards. As China's iron and steel plants enter the winter off-season, iron ore prices may remain at a lower level for long-term sales.

Australia’s total exports of iron ore (62% iron) this year totaled 718 million metric tons, which will grow to a record 766 million metric tons next year. China’s total imports this year were 938 million tons, but it only grew to 973 million tons next year.

The price of iron ore shipped to Qingdao, China fell to US$68.5 per dry ton on the 17th, the lowest price in more than five years.

Analysts believe that only the reduction of production can drive the recovery of iron ore prices, but mining company BHP Billiton denied the possibility of production cuts, and pointed out that even if they cut production, other companies will also cause excess supply.