Top iron ore producers target record shipments to China

There is less of a cushion for suppliers in China, where about 80 percent of mines have costs of $80 to $90, according to estimates from Mysteel.com, a Shanghai-based adviser. About 25 percent to 30 percent of coastal mines have shut down, said Andrew Hodge, an analyst at Wood Mackenzie Ltd in Sydney. Output in the country will contract 15 percent to 282 million tons next year, JPMorgan estimates.

Nev Power, Fortescue's chief executive officer, said in an interview on Bloomberg Television in mid-August: "We are very comfortable at these prices, but we do expect to see prices drifting up as the higher-cost production exits the market."

Higher inflows from Brazil, Australia may trigger iron ore price declines

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Vale also sees prices rebounding as supply growth slows and mines close, Jose Carlos Martins, the Rio de Janeiro-based company's head of ferrous and strategy, told reporters on July 31.

While a quarter of global supply is break-even or loss-making at prices now, and cuts are happening, high-cost production may be slow to withdraw from the market, Daniel Morgan, an analyst with UBS, wrote in a report dated Thursday.

Prices may have further to decline. Goldman Sachs sees iron ore dropping as low as $75 in 2015, 13 percent below levels now, and averaging $80 over the year. The median of 13 bank forecasts compiled by Bloomberg is for $96, down from $105 this year. Commerzbank AG has the highest prediction at $110.

"We've been the most bearish for a long time," said Christian Lelong, a Goldman analyst in Sydney who has worked at BHP for seven years. "Seaborne supply is very strong. Consumption of iron ore is not growing as strongly. You have too much iron ore, which means prices drop," he said last month.

Inventories at Chinese ports climbed 28 percent this year and reached a record 113.7 million tons in July, data from Shanghai Steelhome Information Technology Co show. Global supply excluding mines that have not secured financing and require approvals is poised to grow 8.6 percent next year to 1.44 billion tons as producers in Australia and Brazil expand, Bloomberg Intelligence estimates.

China's weakening property sector is damping the outlook for steel, Goldman said. However, Fortescue's Power is "firmly confident" in China's growth as urban development fuels steel use, he said on Aug 20. BHP sees Chinese steel output rising to 1.1 billion tons in the next decade.