CANBERRA (Scrap Monster): The Bureau of Resources and Energy Economics (BREE) has reduced the price forecast for iron ore on concerns of supply abundance towards the end of the year 2014. The agency forecasts the prices to drift further lower in 2015. The findings were published in the latest Resources and Energy Quarterly.
According to BREE, growth in iron ore volumes is expected to underpin the rise in mining earnings. The mining earnings are forecast to grow at 15% to $122.9 billion, but the iron ore price forecast for 2014 is being reduced to an average of $111 to $105/t. The prices are expected to fall further to average at $97/t during 2015.
The easing of stock levels at Chinese ports and the anticipated pick up in steel demand during latter half of the year may trigger a sharp rebound in iron ore prices. But new capacity additions are likely to exacerbate the abundant supply levels. This will limit the chances of rebound in iron ore prices. The recently commissioned mines and expansions will deliver higher output from Australia which would compensate for the supply cuts from China.
The Bureau of Resources and Energy Economics is an economic research unit within the Australian Department of Industry. BREE provides professionally independent, high quality economic research, data, analysis and advice to governments, industries and other stakeholders on issues affecting Australia's energy and resources sectors.