SINGAPORE, April 13
(Reuters) - Iron ore will fall to $36 a tonne in the third quarter and stay
below $40 for the rest of the year as big miners boost supply even further and
China's demand declines, Citigroup said on Monday.
Spot iron
ore <.IO62-CNI=SI>
has lost 60 percent over the past 12 months, dropping below $50 a tonne this
month for the first time since a key index pricing began in 2008, amid a glut
as mega miners Vale , Rio Tinto and BHP Billiton expanded production.
"We forecast
incremental export production growth of over 110 million tonnes in 2015 of
which 68 million tonnes alone should come from Rio Tinto," Citigroup said
in its second-quarter commodities outlook.
"New Chinese
mines are still coming online as well, with over 60 million tonnes in the
pipeline."
Iron ore will drop to
$36 a tonne in the third quarter from a projected $44 in April-June and should
stand at $38 in the last quarter of the year, Citigroup said.
For the year, the
steelmaking commodity will average at $45 a tonne, less than half of the 2014
average of $97, the bank said. It sees iron ore at $40 next year, $39 in 2017
and $40 in 2018.
"Iron ore demand
in China is declining with steel production down year-on-year and domestic
demand even worse," it said.
"Prices need to
fall significantly below cash costs for a prolonged period to induce
curtailments. Supply should become increasingly resilient as it becomes
concentrated in large and integrated producers."
Iron ore prices for
future delivery have slid 30 percent in the space of a month, and the outlook
for the commodity is now more bearish than oil and more dire than ever for
miners struggling to just stay in business.
Australian miner Atlas
Iron Ltd became the latest casualty in a strategy by bigger iron ore producers
to flood the market, saying on Friday that it will progressively suspend mining
this month due to low prices.
Source-
reuters