Iron ore completed a monthly loss as Goldman Sachs Group Inc. said it may cut its forecast of $80 a metric ton for 2015 amid competition among seaborne producers.
Ore with 62 percent content delivered to Qingdao in China slumped 10.4 percent this month after reaching $68.49 a dry ton on Nov. 26, the lowest level since June 2009, according to data compiled by Metal Bulletin Ltd. Prices advanced 1.9 percent to $71.32 today, posting the first weekly gain in six.
The steel-making raw material has plunged 47 percent in 2014 as BHP Billiton Ltd. (BHP), Rio Tinto Group (RIO) and Vale SA expand output in Australia and Brazil, betting the increase will offset slumping prices and force less competitive mines worldwide to close. A property slump and slowdown in investment growth has set China, the biggest buyer, on course for the weakest full-year growth since 1990.
“We believe the risks are clearly skewed to the downside,” Goldman analysts Christian Lelong and Amber Cai wrote in a report e-mailed today. The New York-based bank has kept its prediction unchanged since March 2013. The raw material averaged $99.73 this year.
For now, the bank said it was keeping its average price forecasts unchanged partly because of the uncertainty related to recent Chinese statistics.
“The changes in market dynamics following the shift to oversupply have come earlier than we expected,” the analysts wrote in the report headed “The iron ore market presses the fast forward button.”
Seaborne Competitors
China reduced its benchmark lending rate to 5.6 percent from 6 percent last week in its first cut since 2012. That came after expansion in gross domestic product cooled to 7.3 percent in the July-September period, the least since 2009, and after a drop in new-home prices and rising bad loans.
Increased competition between suppliers outside of China is becoming more important as the buffer of high-cost, price sensitive mines in the country is depleted and the Chinese cost curve becomes less relevant to prices, the analysts wrote.
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