The global seaborne iron ore glut will probably be 21 percent bigger than forecast next year as steel production slows in China, the world’s largest consumer, according to Goldman Sachs Group Inc.
The surplus will reach 175 million metric tons in 2015, compared with a prior prediction of 145 million tons, Goldman Sachs said in a report dated yesterday. The bank estimates that output will exceed demand by 72 million tons and prices will average $109 a ton in 2014, before dropping to $80 next year.
Iron ore has slumped 27 percent this year as economic growth in China slowed and mining companies from BHP Billiton Ltd. to Rio Tinto Group in Australia boosted output, shifting the global seaborne market into a glut. Banks from Standard Chartered Plc to Credit Suisse Group AG say more Chinese steel mills will go bankrupt and hurt consumption.
“The market is no longer in balance but in the early stage of a structural surplus,” analysts including Christian Lelong wrote in the report. “China will not act as the safety valve in an oversupplied market for much longer.”
Ore with 62 percent iron content delivered to the Chinese port of Tianjin fell 1 percent to $97.50 a dry ton yesterday, the lowest level since September 2012, according to data from The Steel Index Ltd. The decline in iron ore, Australia’s biggest export earner, pulled the country’s dollar today to the weakest level since May 2.