Rio’s former boss predicts iron ore to stay low

With the price of iron ore still at five-year lows, ex-Rio Tinto boss Tom Albanese has warned not to expect an upshot any time soon.

Benchmark iron ore prices fell again last session, and are now trading at $US77.50 a tonne.

This marks a third straight quarterly drop in price for the steelmaking ingredient, the longest decline since 2009.

Iron ore has shed 43 per cent of its value since the start of the year, and former Rio chief Tom Albanese said it was likely to stay weak due to more iron ore in the market than it needs.

“(Iron ore) is likely to stay weak for a while,” Albanese said.

“In this environment, you now have supply probably in excess of demand. It doesn’t take much to drive prices lower.”

However Albanese said as long as the Chinese economy did not slow down too much, signs for the metal market long-term were positive, The Australian reported.

''What we're seeing right now is a continued slowdown in China from where we were," said Albanese.

 "As long as what we're seeing in China is only a slowdown toward a longer-term GDP of 6 to 7 per cent range, then the commodity and metals markets will be in good shape."

However the supply/demand situation is not set to be resolved any time soon with 81 million tonnes of new ore set to hit the market by 2017 on the back of ramp-up plans by BHP, Rio and Vale.

“For the first time in over a decade, the need to eliminate iron ore supply, rather than incentivize it, is determining prices,” one analyst said.

Some will have no choice but to eliminate themselves from the race, as the price drop starts to pinch for high-cost producers.

Western Desert Resources blamed its collapse on the weakened price last month.

Over the next 5 years The Bureau of Resources and Energy Economics said iron ore prices will average between US$90 and US$95 a tonne.

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