Remote-controlled mining trucks loaded with iron ore drive along a road at the Fortescue Solomon iron ore mine located in the Sheila Valley, Australia. Iron ore prices are set to end down for a third straight year in 2015, with the rout seen stretching to next year and beyond as a glut overwhelms a market hit by falling Chinese steel demand, according to a Reuters poll.

Reuters
Manila

Iron ore prices are set to end down for a third straight year in 2015, with the rout seen stretching to next year and beyond as a glut overwhelms a market hit by falling Chinese steel demand, a Reuters poll showed.
The steelmaking commodity, battered by a slowdown in the world’s No 2 economy, could fall below $30 a tonne in the next few months, forcing more high-cost suppliers out of business, some of the analysts polled said.
But the volume of exiting supply might not be enough to balance the market as top, low-cost producers boost output further, they said.
Benchmark 62-percent grade iron ore for delivery to China will average $47 a tonne in 2016 and $45 in 2017, according to the median forecasts of 14 analysts polled by Reuters.
Those estimates are down from $50 a tonne for both years in a September poll. The price has fallen by a third since then, hitting a low of $37, its weakest since at least 2008.
“If you look at the way it drops, it drops a lot quicker than when it rallies. So it could get to $25 or in the $20s in the next six months,” said Kelly Teoh, iron ore derivatives broker at Clarkson Platou Futures, who sees the price averaging $38.50 next year.
Iron ore has been easily the most hard-hit industrial commodity, losing 46% this year, outstripping crude oil and copper. The bulk commodity declined by about the same degree in 2014.
The relentless price drop has shut smaller suppliers, including in China where raw ore output fell 9% in January-October. Macquarie expects 62mn tonnes of supply from marginal producers outside China to be displaced next year.
But majors are not budging in lifting output, stoking the global glut. Top iron ore miner Vale SA is on track to start production at its massive S11D mine in Brazil in 2017, which will add 90mn tonnes in annual output.
Macquarie said 2017 could be “the worst year for iron ore”, with Vale ramping up and if Brazil’s Samarco comes back online after a likely outage next year following a burst dam at the 30mn-tonnes a year mine killed at least 13 people.
The glut is becoming more pronounced in the face of slowing Chinese steel demand and without a market big enough to take over China’s slack.
India, the most comparable market to China in terms of urbanisation potential and population, has abundant reserves of iron ore that are of far higher quality than China’s and could easily meet its needs.
“The iron ore sector may have to hibernate for an extended period before alternative steel markets in other regions take over from China,” Goldman Sachs said this week.