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The World Bank expects iron ore prices to halve

Iron and steel works in Ganyu County, China. ChinaFotoPress/ChinaFotoPress via Getty Images

Iron ore prices are expected to see further big falls of up to 46% this year due to increases in output from Australia and Brazil, says the World Bank in its latest quarterly Commodity Markets Outlook.

“Metals prices are projected to decline by 17% in 2015 due to increases in new production capacity and slowing demand growth in China,” the report says.

“The largest decline is for iron ore, expected to fall by 46% due to significant increases in new capacity from Australia and Brazil, followed by tin prices falling 30%.”

The bank says metals markets are adjusting by the closure of high-cost operations and reduced investment.

“Risks to the metal price forecasts include slower demand in China and likely tightening environmental regulations to contain pollution,” the bank says.

Steel output is down in China, where half the world’s steel is produced, and little growth is anticipated.

Overall, the World Bank is forecasting price declines across all main commodity price indices in 2015, mainly due to abundant supplies.

However, the 2015 forecast for crude oil prices is being increased to $57 per barrel from $53.

“Despite the marginal increase in the price forecast for 2015, large inventories and rising output from OPEC members suggest prices will likely remain weak in the medium-term,” says John Baffes, Senior Economist and lead author of Commodity Markets Outlook.

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