Half of output from small iron ore miners may close as demand peaks - Goldman
By Manolo Serapio Jr
SINGAPORE, April 16 (Reuters) - Up to half of iron ore output by miners outside the mega producers in Australia and Brazil is at risk of closure with global demand set to peak next year, Goldman Sachs said.
"We expect seaborne iron ore demand to peak in 2016 as the displacement of marginal Chinese iron ore production fails to offset a contraction in domestic steel consumption," Goldman said in a report in which it slashed its price forecasts.
Goldman cut its 2015 iron ore price estimate by 18 percent to $52 a tonne. It sees the price at $44 in 2016 and at $40 in 2017 and 2018, down 29-33 percent from previous forecasts.
Iron ore, which has fallen 60 percent in 12 months, dropped as far as $46.70 on April 2, the lowest since 2004-2005, based on annual price contracts that preceded the current spot-based system, compiled by Goldman Sachs.
Production volumes among top miners - Vale, Rio Tinto and BHP Billiton - was not at risk, the bank said.
"However, the rest of the industry is now facing an existential challenge," said analysts Christian Lelong and Amber Cai.
About 10 percent of the production capacity of smaller, or Tier 2, iron ore miners is at risk of closure every year through 2019, they said.
"As iron ore prices continue their regression towards pre-2004 levels, the equity value of many Tier 2 producers is likely to be affected," they said. Continuación...