Australian bank cuts 2015 iron ore price f’cast by over 20%

With their current mining costs in a range from $20 to $30 a ton, the world's three biggest iron ore miners Vale, Rio Tinto and BHP Billiton, will be blissfully unperturbed about this latest Down Under bank forecast of a 2015 price of just $78 a ton. Small producers, on the other hand – particularly those already hard pressed to show a profit at the current price of about $100 – will be tightening their grip on their worry beads – GK

SYDNEY, Nov 10 (Reuters) – Australia's ANZ Bank on Monday slashed its 2015 iron ore price forecast to an average $78 a tonne from $101, citing a mounting supply glut and weak demand for the steelmaking ingredient in China, the world's top importer.

The revision puts ANZ, previously among the more bullish on iron ore's prospects of staging a price recovery next year, at the lower end of forecasts.

"A combination of tough government reform, a weak housing market, and increasing supply mean most see little upside in iron ore prices over the next two years," ANZ senior commodities strategist Mark Pervan said in a report to clients.

Morgan Stanley this month forecast iron ore would average $87 a tonne in 2015, while Goldman Sachs sees a price of $80.

Iron ore for immediate delivery to China <.IO62-CNI=SI> was standing at $75.50 a tonne, its lowest since June 2009, according to data compiled by The Steel Index.

"Where previously we expected a material rebound rally off an oversold base, we are less convinced steel mills will return to restock," Pervan said.

"An increasingly cautious demand backdrop and prolonged tight credit conditions means most steel mills are unwilling or unable to rebuild modest iron ore inventories."

Longer term, a prolonged global surplus late into the decade suggests prices are unlikely to breach $100 tonne again, according to the report.

Moody's Investors Services has estimated that over 300 million tonnes of new and expanded production will enter the supply pool over the next few years, against a seaborne-traded market of around 1 billion tonnes this year.

The majority of the new supply is coming from the world's three-biggest producers, Vale, Rio Tinto and BHP Billiton, whose mining costs sit in the $20-$30 per tonne range, providing adequate profits at lower prices.