Iron ore to stay below US$40

Analysts are predicting the iron ore price to languish below the US$40 per tonne mark for years to come.

Goldman Sachs are incredibly bearish on the metal, expecting it to stay under the US$40 per tonne mark over the next three years, according to Bloomberg.

It has forecast an average price of US$38 per tonne in 2016, falling to US$35 per tonne through 2017 and 2018, around 13% to 14% lower than its previous guidance, when in only late November Goldman analysts predicted “prices to decline… to $44/dmt [CFR China] next year and $40/dmt in 2017”.

This is little surprise for the market as the metal continues to weaken, halving from the price point it sat as it entered 2015.

Prices sit below pre-GFC 2007 lows, with even the major miners bearish on the metal.

Analysts are also forecasting a continued weak market, with the potential for the price to slip to US$30 per tonne.

Independent analyst Andy Xie believes the commodity will slip below further and will trade just above US$30 per tonne next year.

The former Asia-Pacific head economist at Morgan Stanley previously pointed to the steel industry reaching a crisis point, adding they needed to cut production to drive demand.

The ongoing price contraction is unlikely to be resolved unless the major producers carry  out severe output reductions as long as China’s demand remains reduced.

“The iron ore sector may have to hibernate for an extended period before alternative steel markets in other regions take over from China and usher in the next bull market,” analysts Christian Lelong and Amber Cai wrote in the note.

“The short-term outlook remains exposed to the deteriorating health of the Chinese steel industry.

“A maturing steel market in China is ushering in a long period of hibernation for the iron ore industry.”

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