Australia cuts iron ore price forecasts

By Enterprise Monkey

Australia’s Department of Industry, Innovation and Science has today slashed its iron ore price forecast for 2016 and anticipates further slides next year.  

In March, the department predicted a price of US $56 a tonne, but concerns over slowing demand growth and well-supplied markets have led to a revised forecast of US $45 a tonne in 2017.

"The revision is based on the assumption that loss making operations may continue to produce for longer than previously expected," the department said in its latest quarterly resources and energy report.

Australia remains the world’s largest exporter of iron ore, which is used primarily in the production of steel. China, the world’s largest importer of the material, currently has significant stockpiles sitting in its major ports.  

Yesterday, credit rating agency Standard and Poor’s downgraded Australia’s credit rating outlook from stable to negative, due to “growing fiscal vulnerabilities”. Among the stated factors in the decision was a significant divide between the Australian government’s forecast for iron ore and S&P's own budget predictions.

The government’s latest budget placed iron ore at US $55 a tonne — almost $20 higher than the S&P forecast.

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Read the July 2016 issue of Business Review Australia and Asia magazine

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