Australia's ministry of industry has forecast a 28pc drop in iron ore prices in 2015 against this year, predicting a fob price of $63/t for 62pc basis Australian iron ore fines.
The Argus ICX, the price for 62pc Fe Chinese imported iron ore, was at $67.35/t at the end of last week.
Iron ore prices have fallen around 50pc in 2014, the ministry said. Unlike previous pricing cycles there were no seasonal increases this year, indicating a structural shift in demand and supply. The price slump has been aided by Chinese iron ore output proving to be much more resilient to lower prices than in previous downturns, with higher cost material exiting market at a much slower pace.
Asian steel mills are now assured of adequate iron ore supplies and are not stocking up ore as much as previously, the ministry said.
But the ministry forecast that higher cost seaborne and Chinese iron ore will exit the global trade at a faster pace in 2015. While demand for ore will remain subdued in the first half of 2015, any upturn in prices in the second half will hinge on an anticipated improvement in China's real estate sector. The slowdown in China's real estate market has been a key trigger for lower steel prices, as the construction sector makes up 55pc of its steel consumption.
Expansion of lower cost production capacity in Australia and Brazil may enter the market to dull any price gains, the ministry said.
It forecast China's iron ore imports in 2015 to rise 3.7pc to 973mn t from 938mn t in 2014. Japan's iron ore imports are forecast to rise to 138mn t next year from 137mn t this year, while South Korea may import 64mn t ore in 2015 from 63mn t in 2014.
Australia's iron ore exports are forecast to rise 6.6pc from a year earlier in 2015 to 766mn t, much slower than the 24pc output growth from 2013 to 2014. The ministry forecast a 7pc increase in Brazilian exports next year to 388mn t in 2015.
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