Iron ore will continue to decline through 2015 when a surge in supplies from the sea that fueled a worldwide glut is set to speed up, said Goldman Sachs Group Inc.
While growth in inventories will likely be modest in the second half of 2014, the rate of growth in seaborne supplies tops consumption by a ratio of three to one, a report dated today compiled by the bank showed. Goldman retained its outlook for the raw material in steelmaking at an average of $80 per metric ton in 2015 from $106 the current year.
Prices have dropped 29% in 2014 as firms, such as Rio Tinto Group and BHP Billiton Ltd cranked up production, banking on the probability that higher supplies will more than cancel out declining prices. Deutsche Bank AG and Morgan Stanley predict lower prices through 2016. Fortsecue Metals Group Ltd has announced it concluded a $9.2 billion expansion to bolster annual production to 155 million tons.
“The shift to oversupply started barely six months ago and the adjustment phase is far from over. Seaborne supply is set to accelerate again in 2015 while Chinese steel production growth slows further,” analysts Christian Lelong and Amber Cai are quoted by Bloomberg as saying.
Meanwhile, shipments from BHP and Fortescue are likely to be interrupted if tug boat engineers at Port Hedland, the largest iron ore port in Australia, go ahead with their planned strike for four hours on Aug. 9, 11 and 13.
The impending industrial action comes against the backdrop of a dispute between tug workers and Teekay Shipping at Port Hedland, an operator which oversees 25% of the global seaborne iron ore, mostly destined for markets in China, Japan and South Korea.
“BHP Billiton believes the proposed action by the AIMPE is unlawful given it falls outside the protected action ballot order,” BHP told Reuters.
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