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The agency now expects iron ore prices to average $65 per tonne cfr for 2015 and 2016, compared with its previous forecast of $85 per tonne cfr, it said on Tuesday January 21.

This is even lower than current market levels.

Metal Bulletin’s 62% Fe Iron Ore Index was at $68.16 per tonne cfr Qingdao on Tuesday.

“We are significantly lowering our price assumptions for key commodities, notably iron ore […] We believe this could result in some negative rating actions and outlook changes over the next week or two, as we review our portfolio of credits,” the agency said.

S&P said its forecast cut reflects not just the effects of weaker supply-demand balances, but also lower production costs, including substantial changes in foreign exchange rates.

“At our assumed price of $65 per metric ton, we expect weak credit measures to persist until 2017 in the absence of sharp production curtailments,” it said.

The agency estimates that there will be about 100 million tonnes of seaborne supply coming into the market in 2015.

“This, together with softer demand growth from China, will limit any meaningful and sustainable recovery in iron ore prices in the next two years. Market equilibrium might only improve if the market finally absorbs this new supply. We believe that this will likely occur in 2017, driving prices up that year.”

S&P also cut its price forecast for copper in 2015 and 2016, from $3.10 per pound to $2.70 per pound.

It expects China’s GDP growth rate to drop to 6.7% by 2016, from 7.4% in 2014.