Analysts at ANZ Bank are confident that the sinking iron ore price will find a floor around $US70 a tonne as Chinese mines are forced to close under financial distress.
“Substantial domestic iron ore mine closures would occur between $US70 to $US75 a tonne, creating a floor,” the bank said in a report, according to Bloomberg.
“Opportunistic Chinese steel mill restocking is not occurring at low prices and highlights how difficult near-term steel conditions must be on the ground.”
The comments follow an earlier report this week from ANZ’s head of commodity research, Mark Pervan, that warned the iron ore price may never again clear $US100 a tonne.
Mr Pervan cut the bank’s forecast for 2015 prices to an average of $US78 a tonne, sharply below a previous prediction of $US101 a tonne. The commodity may then rise to an average of $US85 a tonne in 2016 and $US89 a tonne in 2017.
The ANZ report coincided with a sharp reduction in the forecasts of Citigroup, which slashed expectations for the raw material in 2015.
Citi now predicts an average of $US72 a tonne for the first quarter of next year, falling to an average of $US60 a tonne in the third quarter before rising slightly at the end of the year.
The bank also tips a temporary fall into the $US50s at some stage during the third quarter of 2015.
The price of iron ore has slumped 45 per cent this year, setting a new five-year low of $US75.40 on Wednesday this week. It closed the latest session at $US75.50.
The retreat has been driven by rising supply from industry heavyweights Rio Tinto, BHP Billiton and Vale at a time when demand in China has been mixed.
Source: Business Spectator
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