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Iron Ore Prices Seen by UBS at Risk of Declining on Steel Output

Iron ore prices are at risk of falling this quarter if a seasonal cut in steel production rates occurs, with prices to extend declines into next year amid surging global supply, according to UBS AG. (UBSN)

“Beyond the risk of a seasonal pullback in output –- prompting an ore price correction –- we have a modestly bearish outlook for prices,” analysts including Andreas Bokkenheuser wrote in a report dated yesterday.

Prices will average $106 a ton in 2014 and $95 in 2015 from $123 this year, according to the report. UBS had previously projected a correction in the third quarter.

Iron ore entered a bull market in July as users in China replenished stockpiles that shrank in March to the lowest level since 2009. Macquarie Group Ltd. expects prices to push higher to the end of the year amid Chinese restocking while Citigroup Inc. said last month it is bearish in the short-term. Rio Tinto Group reported yesterday record third-quarter iron ore output and its expansion in Australia’s Pilbara region to 360 million tons from 290 million tons is under way.

UBS bank forecasts a global seaborne surplus of 154 million tons in 2014 from 24 million tons this year as production at Australian mines increases.

Iron ore with 62 percent content delivered to the Chinese port of Tianjin rose 0.4 percent to $133.60 a ton yesterday, the highest since Sept. 26, according to The Steel Index Ltd. Prices have rallied 21 percent from this year’s low on May 31.

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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