World iron ore mkts to be hit by oversupply for few yrs:UNCTAD

Asserting that oversupply and subdued demand in iron ore made 2015 a challenging year, UN's trade agency today said the market will witness increased supplies of the ore for a "few more years".
The United Nations Conference on Trade and Development (UNCTAD) in a report said that continuing increase in supply combined with a slump in demand made 2015 a challenging year for the iron ore market.
"The report estimates that the world iron ore market will be characterised by potential or actual oversupply for a few more years to come," it added.
This will prevent prices from rising above a certain level and they will be determined by what is needed for additional investment to go ahead, particularly by mining giant Vale in Brazil, UNCTAD said in the report.

It reveals that slowing growth in global steel production meant that market for iron ore -- main ingredient in making steel -- entered a new phase with slower growth, lower prices and squeezed margins for mining companies.
The report notes that world crude steel production in 2015 reached an estimated 1.76 billion tonnes, a fall of 2.9 per cent, while iron ore production reached 1.95 billion tonnes, down 6 per cent on 2014.

"The effect on the iron ore market was that, after a long period of rapid growth, demand levelled off and prices returned to levels not seen since 2002. The price of iron ore began 2015 at USD 71.26 per dry metric tonne but fell 39 per cent by the end of the year," it added.

A reorientation of China's economic strategy brought growth in the use of steel almost to a halt and signs of demand picking up in other parts of the world were not enough to offset China's slowdown.
"At the same time, the world's largest iron ore mining companies not only expanded production in Australia, but also elsewhere, leading to a substantial supply overhang," it added.
Closures of capacity, particularly in China, were not large enough to offset these expansions and many mining projects under development were halted or shelved.
Demand for steel in China is set to grow considerably more slowly than during the past decade, while demand in the rest of the world is set to pick up, in spite of the weak macroeconomic outlook in the Euro zone, the report revealed.

New supplies will come mainly from Vale, Rio Tinto and BHP Billiton, the three largest producers, which are expected to be cautious in their approach to investment decisions, it added.
In 2014, world iron ore production rose by just 1.9 per cent to 2.05 billion tonnes. Production increased in all regions except Asia, where it declined by 21 per cent. In China, output fell by 27 per cent. Australia saw continued growth of 19 per cent in 2014, to 724 million tonnes.
In Brazil, output increased by 2.1 per cent to 399 million tonnes.