Macquarie Bank downgrades iron ore price

Macquarie Group has joined the list of major banks that are cutting their iron ore price forecasts.

Last week, the bank said it expects iron ore prices to average $US68 a tonne in 2015 and $US65 a tonne in 2016.

And like the other banks, Macquarie said the price drop was due to a surplus of supply entering the market as the three majors- BHP Billiton, Rio Tinto and Vale – increase production.

"Rather than requiring this displacement to come from marginal operators with low capex and high opex, the next round of cuts will need to come from more structural mining operations that just 18 months ago could have been making $50/mt or more in cash margin," Macquarie said

"These producers will be reluctant to cut output and it will probably be balance sheet strength rather than cost curve position that ultimately decides who lives and who dies."

UBS and CITI also cut iron ore price forecasts for 2015 and 2016 last week.

UBS Group said the global iron ore surplus will rise from 38 million tonnes to more than 200 million tonnes by 2018.

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