Goldman Joins Banks Cutting Iron Ore Outlook on Global Glut – by Jasmine Ng (Bloomberg News – January 23, 2015)

http://www.bloomberg.com/

First Citigroup Inc., then UBS Group AG, now Goldman Sachs Group Inc. For iron ore, which plummeted 47 percent in 2014, the cuts to price forecasts from global banks just keep coming in the opening weeks of the year.

The steel-making ingredient may average $66 a metric ton this year from an earlier estimate of $80, Goldman Sachs said in a report dated Jan. 23. This is the first time the New York-based bank has reduced its 2015 prediction since March 2013, and it’s at least the fifth bank this month to lower estimates, citing rising seaborne supplies and weaker demand growth from China, the biggest user.

The iron-ore surplus emerged last year after the largest miners including Rio Tinto Group (RIO), BHP Billiton Ltd. and Vale SA (VALE5) invested billions of dollars to boost output and as China grew at the slowest pace in more than two decades. Cheaper energy costs and depreciating currencies may delay supply cuts needed to rebalance the market, causing prices to extend losses, said Citigroup and UBS, which pared estimates for the commodity by as much as 22 percent.

“Significant overinvestment to date will ensure that the market is well supplied, while demand from the Chinese steel sector is maturing,” Goldman analysts including Christian Lelong wrote in the report. “A painful war of attrition awaits” the iron ore industry as less competitive mines shut, the analysts said.

Five-Year Low

Ore with 62 percent content delivered to Qingdao, China, declined 0.6 percent to $66.42 a dry ton on Jan. 23, the lowest level since 2009, according to Metal Bulletin Ltd. Prices capped the third consecutive weekly loss, the longest streak since November.

Citigroup reduced forecasts to $58 in 2015 and $62 next year, down from estimates of $65 for both years, according to a report dated Jan. 14. UBS sees the raw material averaging $66 this year, 22 percent less than previously forecast, and $65 in 2016, down 21 percent, and lists iron ore as its least-favored metal, it said Jan. 15.

For the rest of this article, click here: http://www.bloomberg.com//news/2015-01-23/goldman-joins-banks-cutting-iron-ore-outlook-on-global-surplus.html