Iron Miners Face Test of Discipline as China Challenge Looms – by Jasmine Ng and David Stringer (Bloomberg News – October 3, 2016)

The world’s largest iron ore producers will need to exert tight control over supplies to keep prices at about $45 a metric ton as China’s drive to weed out unwanted steel capacity poses risks to demand, according to Singapore-based DBS Group Holdings Ltd.

The commodity’s rally in 2016 may come under pressure as consumption in China is poised to weaken in the coming years, Chief Investment Officer Lim Say Boon said in a quarterly report. Iron ore was at $55.86 a dry ton on Monday, and hasn’t traded below $45 since February, according to Metal Bulletin Ltd.

Iron ore sagged in September, eroding this year’s surprise advance, on resurgent concern that supply growth will again swamp the market even as some miners say they are now prioritizing the value of exports over volumes.

With Brazil’s Vale SA set to start a four-year ramp-up of its S11D project, banks from Citigroup Inc. to Morgan Stanley, as well as miner BHP Billiton Ltd., have said the additional output will probably contribute to weaker prices.

“Although the price of iron ore has been in an uptrend since the start of the year, it could be difficult for the market to sustain those gains,” Lim wrote in the report, which was received on Monday. It didn’t list specific price forecasts. “Australian and Brazilian producers will have to maintain tight shipment discipline to keep the price” at about $45, he said.

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