* Goldman cuts iron ore price forecasts for 2015-2018
* Says half of small miners' output may shut as demand peaks
* Moody's says potential of rating changes on miners 'heightened' (Adds Moody's outlook)
By Manolo Serapio Jr
SINGAPORE, April 16 (Reuters) - Up to half of iron ore output by miners outside the three mega producers in Australia and Brazil is at risk of closure with global demand set to peak at about 1.4 billion tonnes next year, Goldman Sachs said.
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," Goldman analysts Christian Lelong and Amber Cai said in a report.
"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," they said.
Separately, Moody's Investors Service said supply reductions were dwarfed by planned increases estimated to exceed 300 million tonnes over the next several years.
Goldman cut its 2015 iron ore price estimate by 18 percent to $52 a tonne. It forecast $44 in 2016 and $40 in 2017 and 2018, down 29-33 percent from previous estimates.
The price could drop to $40 this year and next, based on Moody's estimates.
Iron ore 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.
About 10 percent of the production capacity of smaller iron ore miners is at risk of closure every year through 2019, they said.
Australia's Atlas Iron Ltd last week said it was halting production, while China's Sinosteel Midwest Corp is suspending production at its Blue Hills project in Australia.
Vale, Rio and BHP account for around 70 percent of global seaborne iron ore trade, which reached 1.36 billion tonnes last year.
But a slowing economy has hurt Chinese demand, with steel production shrinking in the first quarter after consumption dropped last year for the first time in three decades.
"At current spot iron ore prices in the mid-$40/tonne range, BHP Billiton, Rio Tinto and Vale are likely approaching breakeven, while others, such as Fortescue, could turn negative," Moody's said in a report.
Moody's said the price forecasts did not mean immediate action on credit ratings, but warned that the "likelihood of outlook or rating changes is heightened".
Chinese steel output is seen contracting by 9 percent over the six-year period through 2019, Goldman said.
Goldman estimates mine closures this year, including in China, to reach 126 million tonnes and 123 million tonnes in 2016. (Editing by Ed Davies)