In the short-term, the ongoing increase in low-cost supply will continue to put pressure on the price of iron ore as it outstrips the increase in demand.
Consequently, many higher cost producers are likely to shut down operations and this will drive some, but not a significant, reduction in the supply of iron ore. Medium and long- term, the expectation is that low-cost supply will continue to be higher than demand as a number of low- cost iron ore expansion projects, principally in Australia and Brazil, will be finalized and production ramped up. There should be less volatility in iron ore prices in 2016 than there has been in 2014 and 2015 and any price increases will be gradual. The iron ore industry continues to wait for the pricing scenario to improve, but, as of yet, it has not occurred.
“Many higher cost producers are likely to shut down operations and this will drive some, but not a significant, reduction in the supply of iron ore.”
KPMG in Brazil