Minews - Iron Ore Outlook Cut by JPMorgan

(Minews) - Iron ore prices will extend declines as growth in low-cost supply from the world’s largest producers outstrips demand, according to JPMorgan Chase & Co., which cut forecasts through 2017. Mining companies’ shares sank.

The steel-making raw material will average $67 a metric ton next year, 24 percent less than previously forecast, and $65 in 2016, down 23 percent, the bank said in an e-mailed report received today. So far this year, it’s averaged $98.82 a ton, according to data from Metal Bulletin Ltd. In 2017, prices will average $69 a ton, 16 percent less, the bank said.

Iron ore is heading for the biggest annual loss in at least five years as Rio Tinto Group, BHP Billiton Ltd. and Vale SA expanded output, spurring a glut just as growth slowed in China. The larger miners are choosing to overproduce, driving prices lower and forcing the closure of higher-cost suppliers, according to Bank of America Merrill Lynch. The raw material may drop to less than $60 next year, Citigroup Inc. estimates.

“The only way the oversupply can be averted is if the low-cost producers cut back on their growth targets,” JPMorgan said in the report, which was dated Dec. 7. “This is unlikely: feedback from recent site visits to the Pilbara suggests there is currently no consideration for slowing capacity growth from either Rio Tinto or BHP Billiton.”