(Minews) - Swiss investment house UBS expects the price of iron ore to fall again later in the year, amid a glut of apartments built in China and a global oversupply of the ore, which is used to make steel.
UBS said demand for steel has peaked in China and it does not expect a pickup in Chinese housing construction.
UBS global commodity analyst Daniel Morgan said he expects iron ore prices to dip to as low as $US45 a tonne in the second half of 2015, unless more iron ore mines close down.
"We think that there's been too much construction of residential apartments in China," Mr Morgan said.
Mr Morgan said more supply was due on the market later in the year including from billionaire Gina Rinehart's Roy Hill project, which he expected would push down prices.
"We've got Roy Hill coming to the market in the second half of early next year, so we think there's a bit of a short-term uplift and it should fade from here," he said.
Seasonal restocking by Chinese mills has pushed up the iron ore price from a low of $US47 a tonne in April to just above $US63 a tonne.
UBS resources research head Glyn Lawcock said another price fall would put pressure on Australian miners who have slashed production costs by $US20 to $US30 a tonne, to around $US50 a tonne.
Atlas Iron had to suspend mining because of the falling iron ore price, but was able to restart production after its contractors agreed to cut costs.
"What Atlas has done getting contractors to work for no margin and profit share, that can only go so far," Mr Lawcock said.
Li Xinchuang, the deputy head of the China Iron and Steel Association, which represents Chinese steel mills, said Chinese steel consumption peaked last year along with iron ore demand.
But he said Australian iron ore miners have increased their market share of iron ore imports to China and demand for imported iron ore would remain high for this year and next.
Mr Li is more optimistic about iron ore prices than UBS.
"I don't think the iron ore price will be down very, very low — even lower than 40 dollars as some forecast," Mr Li said.
"It will be around $US55 to $US65 ... that's my personal forecast for the next two years."
