The iron ore price will average just US$67 a tonne in 2015, while it will slip to US$65 in 2016.
That's the view of JP Morgan Chase & Co, which has just cut its forecasts for the steelmaking ingredient according to The Australian Financial Review. In fact, its new forecast for next year is 24% lower than its initial estimates, while its forecast for 2016 is also down 23%. Those estimates compare to the average price of US$98.82 a tonne received for the commodity in 2014.
Indeed, the tumbling iron ore price is wreaking havoc on the mining sector this year and if those forecasts are anything to go by, things could certainly get a whole lot worse from here. The nation's larger miners, being BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO), will suffer from tighter margins despite their enormous production increases, while other companies like Fortescue Metals Group Limited (ASX: FMG) and BC Iron Limited (ASX: BCI) could struggle to make a profit.
Really, the only way that conditions can improve is if Chinese growth accelerates again as a result of its interest rate cuts, or if BHP, Rio Tinto and Brazil's Vale reduce their growth targets. Unfortunately, neither of those situations look likely, meaning investors should continue to avoid the sector altogether for now.
