Iron ore price reverses to losses as weakening China steel consumption drags
Apparent consumption of five major steel products slipped by 2.1% week-on-week.
Barry Fitzgerald says that iron ore prices will be falling to earth in the short-term due to over-supply:
The big question is when will the crunch come? It is not that far off, raising fears for the dozens of Aussie iron ore hopefuls that are yet to get into production or which don’t yet have a solution to their rail and port infrastructure shortcomings.
Goldman Sachs reckons that the iron ore market will move into over supply in 2014 and that ”prices will fall significantly at that time”.
It is forecasting modest oversupply in the traded (seaborne) market in 2013 of 48 million tonnes or 4 per cent, growing to a surplus of 147 million tonnes or 12 per cent in 2014 and some 266 million tonnes or a 20 per cent surplus in 2015.
To put that in perspective, BHP is currently producing at an annual rate of 148 million tonnes from its Pilbara operations. So come as early as 2014, an equivalent amount of iron ore – be it from the Pilbara or anywhere else – will be surplus to world demand.
Michael Allan McCrae wrote this story. You can contact him at [email protected]or@michaelmccrae.
