Mining shares fall as iron ore prices are expected to drop over the next year

Courtney Goldsmith
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Inside The Steel Making Process
Iron ore prices are seen falling over the next year (Source: Getty)

The price of China's iron ore has dropped after a report suggested prices could fall to an average of $65 a tonne by the end of 2017.

The metal fell to its lowest point since November after a report from Australia's Department of Industry, Innovation and Science said average prices in China will fall to $65 a tonne this year, before falling further to $51. Prices are currently around $76 a tonne.

Prices rallied to a 30-month high of $89 a tonne in mid-February, the report said, and in the March quarter the average was $79 a tonne, up 75 per cent year-on-year due to demand in China's steel sector.

But costs are seen lower over the next year due to growing supply outpacing demand.

Read more: Iron ore price gains 20 per cent, pushes up mining share prices

"The iron ore price is forecast to decline over the forecast period, reflecting a gradual easing of recent market tightness," it said.

"With current price levels unlikely to be sustained beyond the short term, the price is forecast to decline to average $65 a tonne in 2017. The price is then projected to further decline to average $51 a tonne (2017 dollars) over the remainder of the outlook period, weighed down by the combined impact of ongoing growth in low-cost supply and soft demand."

Miners were hit by the news. In morning trading, Anglo American shares dropped 2.45 per cent, Rio Tinto's stock was down 2.36 per cent, and Glencore edged 1.77 per cent lower.

Read more: Metal prices soar on fears of supply shortage

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