Further 30% drop in iron-ore prices could not be ruled out, says Goldman Sachs

By Paul Ploumis 19 Aug 2015  Last updated at 03:56:07 GMT

The iron ore prices are likely to witness further fall of 30% over the next eighteen months, says the latest research note published by Goldman Sachs.

BEIJING (Scrap Monster): The latest research report published by Goldman Sachs Group indicates further fall in iron ore prices over forthcoming quarters. The report predicts 30% drop in the commodity prices over the period of next eighteen months, mainly on account of expanding supply chains and falling steel production.

Iron ore prices have staged strong rebound in the past several weeks as shipments from major exporters in Brazil and Australia dropped behind estimates. The rise in steel prices in China also led to sharp recovery in raw material prices during this period. According to Goldman Sachs, the supply disruptions at Chinese ports and the after effect of yuan devaluation are likely to have short term impact. The supplies will begin to grow soon, it noted.

Meantime, Goldman Sachs kept its iron ore price forecasts unchanged for the upcoming quarters. The prices are likely to average at $49 per ton during the current quarter. The average prices are likely to fall further to $48 per ton during Q4 this year. During first quarter of 2016, the prices may drop sharply to $44 per ton. The average price forecast for the entire year 2016 too has been kept unchanged at $44 per ton.

Gold man Sachs termed the recent recovery in prices as ‘the calm before the storm’. The prices will decline by nearly 30% over the next 18 months, it stated. The slide in prices would force a handful of miners to shut their operations permanently. Big players may see their operating margins squeezed. The price crunch will have widespread impact on the entire industry, the group warns.

Meanwhile, ore with 62 per cent delivered to Qingdao fell 0.1 per cent to $US56.66 a dry ton on Monday. Also, iron ore futures on the Dalian Commodity Exchange dropped 1 per cent on Monday.