(Bloomberg) -- Iron ore is poised to extend declines into the $80s-a-ton range as China’s steelmakers reduce production, according to Citigroup Inc., which pared price forecasts and said that market dynamics have shifted.
“Further price weakness is required to bring the market back into balance,” Citigroup analysts including Shreyas Madabushi said in a report received on Tuesday. “Below $100 a ton would have offered an attractive iron ore dip-buying opportunity in the past, but the set-up looks different this time.”
Iron ore collapsed to the lowest level since 2022 this month as a crisis rippled through China’s steel industry, which has been faced with slumping demand, weaker product prices and losses at many mills. At the same time, leading miners have been raising exports, putting the seaborne market in surplus.
“China is in transition to an economy led by ‘new productive forces’ requiring less steel,” the Citi analysts said. Mills in the country — the world’s largest steelmaker — will have to rationalize output levels, impacting iron ore consumption and prices, they said.
The bank’s three-month outlook for iron ore was cut to $85 a ton from $95. Futures in Singapore — which gained 2.9% on Monday — were 0.9% lower at $93.80 at 2:07 p.m. local time.
--With assistance from Martin Ritchie and Yongchang Chin.
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