The World Bank has forecast a 35pc drop in 2015 seaborne iron ore prices against a year earlier because of a significant increase in new capacity.
The World Bank cut its forecast for 62pc basis cfr China iron ore fines to $63/t for 2015 from a January forecast of $75/t. The bank's average 2014 iron ore price was $96.90/t.
Prices in March were a third of the highs touched by iron ore prices in 2011, the bank said, primarily because of low-cost supplies from Australia and Brazil.
While high-cost iron ore capacity has shut down in China and other countries, more low-cost iron ore will enter the market during the next two years, the bank said. Further high-cost supplies will have to exit for the market to rebalance.
Large Australia-based producers Fortescue and BHP Billiton are slowing down their expansion plans to curb supplies, while the shutdown of smaller Chinese mines and Australian producers, such as Atlas Iron, have offered support to iron ore prices this month. The Argus ICX, the price for 62pc Fe Chinese imported iron ore, has risen by nearly 14pc from its $46.05/t low in April to $52.45/t yesterday.
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