The global iron ore market faces increasingly severe oversupply, according to Citigroup Inc., which said the commodity’s gains will probably be reversed in the second half.
Increases in production, including from miners that restarted output after this year’s rally, coupled with likely declines in steel prices, will combine to hurt iron ore, the bank said in a quarterly commodities report received Monday. While iron ore’s price declines may have been delayed, they’re still coming, analysts led by Ed Morse wrote.
Ore with 62 percent content delivered to Qingdao was at $58.28 a dry metric ton on Friday, 34 percent higher in 2016, according to Metal Bulletin Ltd. Iron ore may average $45 a ton in 2016, $39 next year and $38 in 2018, according to Citigroup, which raised its prior forecasts from $39 for this year, and $35 for both 2017 and 2018.
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