Iron ore could be in trouble for over ten years: analyst

An analyst out of China has warned the price of iron ore could fall to lows of $US50 a tonne.

Shanghai Jianfeng vice-president Liang Ruian said oversupply coupled with a slowing property market in China could mean the price rout lasts for 10 years.

Speaking to The Australian Liang said the stagnate state of the Chinese real estate market would have a devastating effect on the steel industry.

“The inventory of housing is up to a couple of years, while in China the rapid development of the e-commerce market is having a big impact on the sales and rents for the commercial real estate market. I think the golden ten years that we have had in the real estate market in China is over,” Liang said.

“The crash of the real estate market means the crash of the steel market.”

The comments come as new figures reveal steel consumption in China has fallen by 0.3 per cent, the first decline in 14 years.

It was also revealed that there is 108.4 million tonnes of iron ore stockpiled at Chinese ports.

Last week, Li Xingchuang, president of theChina Metallurgical Industry Planning Association, said steel production would peak at 740 million tonnes in 2017.

The world’s biggest miners, BHP Billiton and Rio Tinto have said Chinese steel production will peak at 1 billion tonnes by 2030.

“I really don’t understand how the big mining companies made that forecast,” said Xingchuang at a steel conference in Shanghai.

As major miners including Rio, BHP and Vale continue with expansion plans that will introduce even more supply into the iron ore market, analysts say a further crash in prices in inevitable.

Expansions will add around 94 million tonnes of new supply from 2015, 75 million tonnes in 2016, and 81 million tonnes in 2017.

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