PERTH, March 20 (Reuters) - Goldman Sachs cut its forecast for iron ore prices by up to 11 percent over the next three years due to excess supply and slower steel output in China, sending the shares of major miners to their lowest in nearly four months.
Goldman lopped its forecast for 2014 by 11 percent to $115 a tonne and for 2015 by 9 percent to $80 a tonne. The forecast for 2013 was lowered by 3 percent to $139 a tonne.
“Seaborne prices will be supported in the near-term by high-cost marginal mines in China, but this cost support will be gradually eroded over the next two years,” the investment bank said in a report.
“Eventually, high-cost mines vulnerable to competition from imported ore will be displaced,” the bank said.
Increasing use of scrap steel in China and lower crude steel production would also weigh on iron ore prices, Goldman said.
“The result is a market surplus from 2014 onwards, driving prices towards the marginal cost of seaborne supply,” it said.
Iron ore prices nearly doubled from three-year lows in September to hit a 16-month high of $158.90 a tonne in February as Chinese mills ramped up steel output in anticipation of a pickup in demand.
But the price has since declined to around $134.40 a tonne as doubts grow about the strength of future demand, curbing appetite for iron ore. Stockpiles of steel products held by Chinese traders have swollen to a record high.
Australian miners Rio Tinto Ltd , BHP Billiton Ltd and Fortescue Metals Group warned on Tuesday of volatile markets and softer prices as growth in China’s steel production slows and more supply comes through.
Rio’s Australia-listed shares slid as much as 3.7 percent to A$56.48, the lowest since Nov. 28. BHP fell nearly 3 percent to a session low of A$33.57, its weakest since Nov. 23, with both stocks tracking steep losses in London in the previous session.