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LONDON, Dec 4 (Reuters) - Vale SA, the world’s biggest iron ore producer, said on Friday it sees global seaborn iron ore demand at a healthy 1.35-1.4 billion tonnes next year, adding that the level of new supply entering the market in 2016 would be minimal.
“Technically prices should be around $50 a tonne next year, but there’s much more going on than that, including sentiment,” said Peter Poppinga, an executive director at Vale.
Spot iron ore prices .IO62-CNI=SI fell below the psychological $40 a tonne threshold on Friday, decimated by falling steel demand in top consumer China and a global glut of the steelmaking raw material.
Iron ore is at its lowest since spot-market pricing began in 2008. Based on the annual pricing that preceded the spot-based system, it is at its lowest in 10 years - trading at just a fifth of a 2011 high of nearly $200 a tonne.
Vale posted a net loss of $2.1 billion in the third quarter due in large part to iron ore prices. While Vale is the world’s largest nickel producer and a major copper, coal and fertilizer producer, iron ore provides the bulk of its profit.
Poppinga said 120 million tonnes of new iron ore supply entered the seaborn market this year, but he expects next year’s figure will be closer to 60-70 million tonnes - an amount equal to the rate of natural depletion of ore bodies.
“The big earthquake (in supply) happened this year. Supply cuts are on the table, the question is demand,” he said.
Poppinga said he expects China steel output and therefore its demand for iron ore will be lower next year, but that this would be offset by increased steel output in other parts of the world.
Vale on Tuesday lowered its own iron ore output forecast to 340 million to 350 million tonnes for 2016, an amount that could increase to a range of 380 million to 400 million tonnes in 2017. (Reporting by Maytaal Angel, editing by William Hardy and Susan Thomas)