Iron Ore Price Could Drop Below $40

Mineweb reported that iron ore price may drop to the $30 per tonne range in the second half of the year as low-cost suppliers continue to flood the market, according to Capital Economics Ltd.

As quoted in the market news:

The surplus will become more evident in the next six months, Caroline Bain, senior commodities economist in London, said in an interview. Higher volumes from Australia and Brazil will spur the renewed slump even as stimulus spending in China boosts steel demand, Bain said, forecasting that the raw material will end the year at $45.

While iron ore is poised to cap the first quarterly climb since 2013 on Tuesday, Capital Economics’ outlook adds to bearish forecasts from Goldman Sachs Group Inc. to Citigroup Inc. that the advance won’t last. Prices rebounded from a decade-low in early April on falling stockpiles in the top user as imports missed expectations. China, which produces half the world’s steel, cut interest rates to a record low at the weekend to support growth and counter an equity-market slump.

This quarter’s rally will be temporary as disruptions to shipments have passed, according to Bain. Some higher-cost mines, which suspended output as prices tumbled before April, took the opportunity to resume operations, she said, citing the example of Australia’s fourth-largest shipper, Atlas Iron Ltd.

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