Global Mining: Morgan Stanley says “the worst is over” for iron ore

Australian iron-ore over-production...Chinese producers shrug off threat
Australian iron-ore over-production…Chinese producers shrug off threat

Iron ore is positioned to reach its biggest annual fall in prices over the past five years, as production of large mining exceeds the growth of China’s demand. According to Tom Price, analyst at Morgan Stanley in London, “the worst is probably over” for the commodity in terms of price drop.

Iron ore with 62% for delivery at the port of Qingdao, China, has lost 47% this year, closing at US $ 71.15 per tonne yesterday (30), according to the Metal Bulletin index. The commodity reached US $ 66.84 per ton, on December 23, recording the minimum since June 2009.

After this low, the product had four consecutive increases, marking the longest streak of positive changes since July. “The main factor that tipped ore prices in 2014 was oversupply led by Australia,” Price said.

Iron ore entered a bear market in March, when BHP Billiton and Rio Tinto expanded to offer a low cost, betting that higher volumes could offset the price and force less competitive mines close.

Concern that China’s growth is slowing also contributed to a negative scenario. Asian parents will close 2014 with the worst growth rate in almost 25 years. Iron ore may fall to less than $ 60 per ton next year, according to projections by Citigroup and Roubini Global Economics.

According to the Goldman Sachs Group, in a report published in November, the iron ore market will have a 300 million tonnes surplus around 2017. The bank said the iron ore producers, led by BHP and Rio Tinto, which are the two largest in the world, implemented $ 120 billion in new mines since 2011.

BHP indicated that it should not detract from its production rate. The president of the Iron Ore division of the Australian company, Jimmy Wilson, said in late November that “if the largest bulk does not come from our business, will come from somewhere.”

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