Australia Cuts Iron Ore Estimate as Prices Drop on China Outlook

Australia, the world’s largest iron ore exporter, lowered its price estimates for the steelmaking raw material this year and 2014 as economic growth in China slows while supply increases.

Prices will average $117 a ton in 2013, compared with $119 forecast in March, the Bureau of Resources and Energy Economics said in a report. Australia may ship 571 million tons this year and 664 million tons in 2014, compared with March estimates of 554 million tons and 662 million tons, the Canberra-based bureau said. Exports totaled 494 million tons in 2012.

Iron ore has tumbled 28 percent from a 16-month high in February, slipping into a bear market in May, on concern that economic growth in the biggest ore buyer is faltering. Goldman Sachs Group Inc. this week joined banks from Barclays Plc to HSBC Holdings Plc in paring projections for China this year to 7.4 percent, below the government’s 7.5 percent goal.

Prices have declined “in line with changing sentiment over China’s economic growth and steel output,” the report said. “It is expected that the monthly rates of production will moderate as the year progresses,” it said, referring to steel.

China’s steel production climbed to a record 67 million metric tons in May, according to the statistics bureau. The country will import 774 million tons of iron ore this year and 805 million tons in 2014, compared with the 773 million tons and 805 million tons estimated in March, the bureau said.

Prices will average $112 a ton in 2014, compared with $114 forecast in March, the bureau said. The bureau’s price forecasts refer to ore with 62 percent iron content free-on-board Australia.

The same grade delivered to the Chinese port of Tianjin fell 2.2 percent to $114 a dry ton yesterday, according to data from The Steel Index Ltd. Prices, which reached $158.90 on Feb. 20, have averaged $137.52 in 2013.

Iron ore can be measured in dry tons, or metric tons less moisture. At Tianjin port moisture can account for 8 percent to 10 percent of the ore’s weight.

To contact the reporter on this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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