10.09.201406:16:20UTC+00Iron age ending says Goldman Sachs

Goldman Sachs Group Inc has announced that the popularity of iron is nearing its end as prices for the ore declines earlier than expected.

WIth supplies of iron ore continuing to heavily surpass demand, prices for the commodity metal look unlikely to recover which may bring the so called iron age, a period marked by tight supplies and above trend profits, to an end this year. In a report made by analysts Christian Lelong and Amber, they said that the entry of new production capacity has caught up with the growth of demand forcing profit margins to reverse back to their historical mean. Price projections for for seaborne ore in 2016 was reduced from $82 per metric ton to $79 while its forecasts for 2017 received deeper cuts from $85 per metric ton to $78. Goldman Sachs maintained their own forecasts for 2015 at $80.

Iron fell into a bear market earlier this year when the world’s largest producers, including the Rio Tinto Group, increased production of low cost output in an attempt to offset declining prices with larger volumes and drive less competitive mines to close. The downward effects were felt sooner than the November prediction of Goldman Sachs when it would fall in value by 15%.

According to Cai and Lelong, “The price decline has been dramatic, but a weak demand outlook in China and the structural nature of the surplus make a recovery unlikely.”

Prices of ore with 62% content in China’s Qingdao port have declined by 38% this year to $83.50 per dry ton, based on data from the Metal Bulletin Ltd.