Australia cuts 2015 iron ore forecast by 5% to $60/tonne

Author: Paul Ploumis18 Mar 2015 Last updated at 04:10:24 GMT

CANBERRA (Scrap Monster): The Australian government has announced further cuts in its 2015 iron ore price forecast. The official forecast was cut by another 5% to $60 per tonne, mainly on account of waning demand growth from China amidst fears of rising supply. The forecast now are more in line with the private forecasts. Three months before, the Australian Department of Industry had announced deep cut in 2015 iron ore price forecast from $94 per tonne to $63 per tonne.

In its latest commodity outlook released Wednesday, the department noted that iron ore prices have been on a steady decline over the past one year, with producers facing intense competition to sell their goods. The sharp plunge in iron ore prices has resulted in some producers operating in losses. The price of the commodity has plunged by almost half during the past one year to almost $57.60 per tonne.

According to industry analysts, the price crunch situation in iron ore is mainly due to excessive production by mining majors across the world. Manu iron ore mining giants including Vale, BHP Billiton and Rio Tinto had ramped up production during the past one year in anticipation of increased demand growth from China. The slackening economic growth in China- the largest consuming nation, has led to supply glut.

Incidentally, iron ore has been replaced by other service sectors such as tourism and education as the biggest export earning sector. The demand for iron ore is likely to soften further as Chinese demand is expected to remain muted on account of slow economic growth. However, the government is optimistic that exports of iron ore may remain strong in 2015. The department raised the iron ore exports forecast for fiscal 2015 from earlier 747.3 million tonnes to 762.9 million tonnes. The exports during fiscal 2016 are likely to increase further to 822.3 million tonnes, it said.