Iron ore prices to average $105 per ton in 2014; expects further drop in 2015: Morgan Stanley

ALBANY (Scrap Monster): Morgan Stanley has reduced the 2014 price estimate for Iron ore from $118 per dry mt down to $105 per dry mt. In its latest report, the financial services firm has stated that the prices are likely to decline further during next year. The prices are forecast to average at $90 per dry mt in 2015.

The 62% Fe equivalent iron ore prices may average at $93 per dry mt during the third quarter of the current year. The prices may rise to $97 per dry mt during the last quarter.Morgan Stanley predicts the iron ore prices to average at $92 per dry mt and $95 per dry mt during Q1 2015 and Q2 2015 respectively.

The firm notes that the inventory levels at Chinese ports continue to sustain at record levels. The completion of first phase expansion of Pilbara iron ore mines would further add to the supplies. The market is already in a saturated state. The price fall in iron ore may lead to closure of many privately owned high cost mines. The Australian iron ore may turn out to be the cost-effective substitute for Chinese iron ore.

Morgan Stanley has cut the price outlook because it notes that the seaborne surplus may grow faster than expected. The level of cost support by Chinese producers is likely to fall.

The prices have dropped below $92 for the first time since 2012. The iron ore prices have declined almost 30% year-to-date.