The Bureau of Resources and Energy Economics predicts iron ore will trade at around $90 – $S95 for the next five years.
The news comes as a $3.20 gain saw prices lift from five-year lows to trade at $US85.20 a tonne on Monday.
It has been widely expected that prices will crash further, with some analysts saying it could drop as low as $US70 a tonne lows by 2016.
However BREE’s executive director Wyne Calder said while the price could dip that low, it won’t stay there, The Australian reported.
“It could go down that far, but we couldn’t see it being sustained at that sort of price level. We still expect a downturn in price. The peaks won’t be as high and the troughs will be a bit lower,” Calder said.
BREE said the positive price expectation comes on the back of growing steel production in China which will expand to 900 – 950 million tonnes a year from the current 800 million tonnes.
Calder said iron ore from high-cost regions may disappear from the market, further helping Australia’s cause.
“China is still importing iron ore from places like the Ukraine, Iran and Peru,” he said.
He also expects high-cost mines in China to close over the winter and not reopen.
Image: Perth Now