UBS Expects Iron Ore Price to Fall Back Down to US$45 per Tonne

The Sydney Morning Herald reported that according to the UBS iron ore miners cutting back production will not be enough to rebalance the oversupplied market and prevent another collapse of the commodity price.

As quoted in the market news:

Australia’s biggest mineral export has rallied from US$47.08 a tonne on April 2 to just under US$61 on Wednesday night, and the benchmark September iron ore futures on the Dalian Commodity Exchange rose this week to US$71.30 – the highest since the end of March.

But in its report, Iron Ore: Supply-cost-price down cycle accelerates, UBS predicted iron ore would be revisiting its April lows by the end of this year and into 2016.

There were many examples of supply cutbacks, said UBS, including Atlas Iron (ASX:AGO) cutting production from 14 million tonnes per annum to around 8 million or 9 million tonnes; BHP Billiton’s (ASX:BHP,NYSE:BHP,LSE:BLT) postponement of its Inner Harbour debottlenecking project, and Brazil’s Vale (NYSE:VALE) hinting at a reduction of 30 million tonnes per year in exports. Against this trend, Rio Tinto (ASX:RIO,NYSE:RIO,LSE:RIO) said on Wednesday it will not limit exports.

However, cost-cutting had accelerated dramatically among producers, with break-even cost targets into the US$35 to US$45 per tonne range for almost all major global suppliers.

Click here to read the full Sydney Morning Herald report.