Australia’s biggest bank has warned the prospect of iron ore falling below $US80 a tonne is “not too far from current reality”.
Iron ore futures dipped a further 0.3 per cent to $US91.94 a tonne on Monday after Goldman Sachs cut its iron ore price forecast for the fourth quarter by $US15 to $US85/t, citing market oversupply.
Prices last week sank to under $US90/t — their lowest level in almost two years as China’s steel slowdown leaves the market awash with too much of the raw material.
“The risk that iron ore prices fall to $US80 a tonne is not too far from current reality, and a level reached as recently as the fourth quarter of 2022,” said Commonwealth Bank resources analyst Vivek Dhar, according to the Australian Financial Review.
Prices have slumped by about a third this year, fuelling talk about how low they must go to force mine closures and bring supply back in line with demand.
Commonwealth Bank said the price may need to sink well below $US90/t to force more producers in India to scale back output and cut stockpiles at Chinese ports.
Goldman Sachs said global supply — much of which comes from Pilbara’s powerhouse operations run by the likes of BHP, Rio Tinto and Fortescue — was 2 per cent higher than this time last year.
