Andy Xie, an independent economist and a former Asia-Pacific chief economist at Morgan Stanley, predicts that iron ore prices will drop below $40/mt before the the end of the year and trade in the $30s in 2016 as demand in China declines, according to Bloomberg.
Mr. Xie added that the steel industry is reaching a critical point with mills in China likely to cut output. “A lot of the marginal [iron ore] producers, the new guys, have to exit. I expect major bankruptcies in this industry,” he said.
Recently US-based Goldman Sachs indicated that as supply and demand continue to diverge, iron ore prices should fall below marginal production costs and trigger mine closures on a sufficient scale.