SAO PAULO--There is "little chance" iron ore prices will rise significantly for a considerable period due to increases in market supplies, particularly from Australia and Brazil, a CRU Group analyst said Wednesday.
Indeed, spot prices for the steelmaking raw material should continue to decline slightly from their current levels of nearly $140 a metric ton delivered to China until 2016, Paul Scott, CRU's Group Manager - Steel, told delegates at the Brazilian Steel Institute's annual congress in Sao Paulo.
Iron ore spot prices were 20% lower in the first quarter than they were in the same 2011 period due to relatively weak steel production in China, according to CRU. Chinese steelmakers, which consume around 60% of world seaborne iron ore, made net losses in the first quarter, their first losses since 2000, Mr. Scott said.
"At the same time as iron ore demand has moderated, supply from major suppliers has increased sharply," Mr. Scott said, adding that this has been mainly due to recent more favorable climatic conditions in Australia and Brazil which has led to higher exports.
Chinese steel demand is now expected to slow to 4-5% annually, lower than in recent years when steel demand growth typically exceeded China's gross domestic product growth rates, according to Mr. Scott.
Still, "iron ore exports from Australia and Brazil will increase sharply," by more than 18 million metric tons a year between 2014 and 2016, particularly from Australia, where new projects will start up, he said.
Australia should increase its stake in the total iron ore export market to nearly 50% by 2016, Mr. Scott said.
The saving grace for the world's big iron ore exporters including BHP Billiton PLC (BHPB.LN), Rio Tinto PLC (RIO.LN) and Vale SA (VALE, VALE5.BR) is that China is becoming increasingly dependent on imports of iron ore as some of its own high-cost iron ore mines are unable to compete in a lower price environment, he said.
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