S&P lowers 2015/16 iron ore forecast to $65 per tonne cfr

Credit rating agency Standard & Poor’s slashed its price forecast for iron ore for 2015 and 2016, its third downward adjustment in the past twelve months.

Paragraph entered by Atlantic migration, in order for SteelFirst articles to display correctly on Metal Bulletin.

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.

What to read next
Fastmarkets has clarified the specifications of its copper grade A cathode and non exchange-deliverable equivalent-grade (EQ) copper cathode premiums, to avoid any confusion regarding the deliverable status of its copper cathode assessments.
The three-month copper price on the London Metal Exchange has slumped significantly since hitting an all-time high of $11,104.50 per tonne on Monday May 20
Copper fabricators in China and the wider Southeast Asian region continue to feel the pain of high copper prices on futures exchanges and a lack of new orderbooks, with some having already asked for a postponing of shipments of long-term copper cathodes, sources told Fastmarkets in the week to Wednesday, May 15.
Could the copper market bullish marathon be taking a mini break? Fastmarkets senior analyst Andy Farida looks at London Metal Exchange copper price movements.
Global copper futures prices are in a frenzy, with record highs being logged on the New York-based Commodity Exchange (Comex), London Metal Exchange and Shanghai Futures Exchange (SHFE) in recent days
Copper prices have pushed up on global metal exchanges in recent weeks and the London Metal Exchange three-month copper price hit an all-time high on Monday May 20, but what are the key reasons behind the record-breaking surge in prices?