Australia cuts forecasts for iron ore

Australia, the world's largest exporter of iron ore, is forecast to supply 818 million tonnes of steelmaking ingredient this year, but warns that price recovery in 2017 will be slower than previously expected due to oversupply.

Australia has signaled that the current iron ore price increases are coming to an end, cutting their price forecasts for the next 18 months, driven by oversupply and weak demand. The Department of Industry, Innovation and Science cut its 2016 forecast for the country's largest export by almost 2 percent on average at $ 44.20 per tonne, and 20 percent in 2017 at $ 44 per tonne. The department had previously forecast iron ore prices to average $ 45 per tonne in 2016 and $ 55 in 2017.

The Industry Department's price calculation will increase the country's projected national budget deficit for 2016-17. The problem is the huge reserves of imported iron ore available in major Chinese ports. Inventories stood at 102.55 million tonnes as of July 1, 2016, the highest since December 2014, according to data tracked by SteelHome SH-TOT-IRONINV.

World trade in iron ore will grow 0.9 percent in 2016 and 4.0 percent in 2017, despite a relatively stable level of global consumption, according to the industry division. This will happen because imports will displace iron ore mined in China.