December 17, 2015 / 3:41 AM / in 2 years

Iron ore futures gain but bearish mood persists, Goldman cuts forecasts

* Goldman says 250 mln T of iron ore needs to be displaced
    * Spot iron ore still below $40/tonne
    * Risks remain skewed to the downside - ANZ

    By Manolo Serapio Jr
    MANILA, Dec 17 (Reuters) - Iron ore futures edged up on
Thursday after a recent rout that pummelled prices to record
lows, but the bearish sentiment persisted as Goldman Sachs cut
its price forecasts, warning that the pace of mine closures
would accelerate.
    The steelmaking commodity has dropped 46 percent this year,
outpacing copper and crude oil, amid a global glut and shrinking
steel demand in top market China.
    Iron ore for May delivery on the Dalian Commodity Exchange
 was up 1 percent at 293.50 yuan ($45) a tonne by 0321
GMT, having touched a record low of 282.50 yuan last week. March
iron ore on the Singapore Exchange gained 0.1 percent
to $36.20.
    Some iron ore cargoes were sold to China at slightly higher
prices, traders said, although private offers remained low in a
bid to draw buyers.
    Some Chinese mills which have been liquidating some iron ore
inventory may have pulled back and the reduction in short-term
supply may have helped prop up prices, said Daniel Hynes, a
commodity strategist with ANZ.
    "For us the risks are still skewed to the downside. We're
seeing continued weakness in the Chinese steel market," said
Hynes.
    Around 250 million tonnes of iron ore mining capacity, about
18 percent of the current supply, need to be displaced over the
next three years, Goldman Sachs said as it cut its price
forecasts further in light of the market's vicious fall.
    Goldman slashed its price estimate for 2016 by 13 percent to
$38 per tonne. It also lowered its 2017 and 2018 forecasts to
$35 a tonne for each year, down 14 percent from previous
projections.
    "We expect the pace of mine closures to accelerate in 2016
as producers with negative cash flow struggle to find
alternative sources of funding," Goldman Sachs analysts
Christian Lelong and Amber Cai wrote in a report.  
    Benchmark 62-percent grade iron ore for delivery to China's
Tianjin port .IO62-CNI=SI climbed nearly 2 percent to $38.20 a
tonne on Wednesday, according to The Steel Index (TSI).
    It touched $37 on Friday, the weakest level recorded by TSI
since it began compiling data in 2008. Prior to TSI records and
during the annual pricing era that preceded the spot-based
system, that level was the lowest since 2005.
        
  Rebar and iron ore prices at 0321 GMT
                                                                                                       
  Contract                          Last    Change   Pct Change
  SHFE REBAR MAY6                   1686    +23.00        +1.38
  DALIAN IRON ORE DCE DCIO MAY6    293.5     +3.00        +1.03
  SGX IRON ORE FUTURES MAR          36.2     +0.05        +0.14
  THE STEEL INDEX 62 PCT INDEX      38.2     +0.70        +1.87
  METAL BULLETIN INDEX             39.18     -0.18        -0.46
                                                                                                       
                                                                                                       
  Dalian iron ore and Shanghai rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.4815 Chinese yuan)

 (Reporting by Manolo Serapio Jr.; Editing by Subhranshu Sahu)

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