Iron ore prices may tumble to sub-$60 levels: Citigroup

Author: Paul Ploumis13 Nov 2014 Last updated at 01:47:16 GMT

SEATTLE (Scrap Monster): The most recent research report published by Citigroup forecasts huge fall in iron ore prices during 2015. The raw material prices are likely to fall under $60 per metric ton, mainly on the back of weakening supply increases and waning demand.

Citigroup has slashed its quarterly forecasts for 2015 by 23%. The prices will average at $72 per metric ton during first quarter of 2015, significantly down from the earlier forecast of $82 per ton. The prices during second quarter will fall to $65 per metric ton. Citigroup had earlier forecast iron ore prices at $80 per ton for Q2 2015. The price forecast for third quarter has been reduced from $78 to $60 per metric ton. The forecast for Q4 now stands at $62, down from the earlier forecast of $78.

The slowdown in Chinese economy and strong supply from mining majors led to huge surplus of the raw material during 2014. The surplus is likely to double in 2015. Renewed supply growth and heightening demand weakness are expected to drive the raw material through an extended bear market period. Incidentally, iron ore prices have plummeted by 44% so far this year alone.

Citigroup predicts that additional 140 million tonnes of iron ore are likely to hit the market in 2015. Ri Tinto plans to raise its export production by 54 million tonnes per annum. Vale is expected to boost production by additional additional 0 million tonnes. BHP may add another 15 million tonnes to its annual export production. On the other hand, China’s steel demand growth is expected to fall further. This will create more pressure on iron ore prices, Citi notes.