More than 145 million metric tons of new iron ore supply will be brought on stream next year and in 2017, according to Fitch Ratings Ltd., which forecast that prices are unlikely to recover.
The projected increase in supply is more than 10 percent of the estimated seaborne market of about 1.3 billion tons, Fitch said in a note on Thursday as it affirmed the ratings on Australiaâ€™s Fortescue Metals Group Ltd. Prices are expected to average $50 a ton through 2015 and 2016, it said.
Iron ore sank to the lowest level in at least six years on Tuesday amid speculation that mills in China are cutting back steel output, hurting demand for the raw material while supplies from the biggest miners expand. Goldman Sachs Group Inc. said last week that the global market is oversupplied, with steel consumption in China remaining weak.
â€œThe closure of high-cost iron ore mines has been slower than we previously anticipated, despite the sharp fall in iron ore prices since 2014,â€ Fitch said. â€œGlobal demand, led by China, has also been weaker than we previously anticipated, and is likely to remain muted through 2016.â€
Ore with 62 percent content delivered to Qingdao fell to $43.89 a dry ton on Tuesday, the lowest level in daily data dating back to May 2009, according to Metal Bulletin Ltd. The commodity, which is headed for a third annual drop, was at $44.07 on Wednesday.