Iron ore to slump again in 2016

Analysts predict further slumps for iron ore in 2016, as new projects such as Roy Hill come online and swing into full production.

Weak demand growth in China and a stronger US dollar will ensure iron ore prices stay down, according to BMI Research.

A report from BMI stated that investors expect the commodity to trade between $US50-60 per tonne for the rest of 2015, dropping again to the $US45-55 range in 2016.

Market shares held by BHP, Rio Tinto and Brazilian major Vale have increased low-cost ore supplies, however China’s steel consumption will contract by 1.3 per cent each year up to 2019, BMI said.

“Global iron ore majors will continue to ramp up production to squeeze out higher-cost competitors,” BMI said.

“BHP Billiton, Rio Tinto and Vale all reported record output in 2014 and will increase output further in the quarters ahead.”

New shipments from Hancock Prospecting’s Roy Hill Project were also flagged to contribute to an increasingly apparent glut of the steel-making commodity, with productivity to increase over the next year to full capacity.

Fortescue Metals Group has also pledged to maintain their shipping levels despite weak prices, and recently gained 5.3 per cent on the ASX to a high of $2.30 on Monday, which has dropped to $2.23 and is continuing on a steady rise.