Iron ore prices to drop 50%: Rio Tinto

Rio Tinto Plc, the world's third-largest miner by market capitalization, expects iron ore prices to drop 50 percent in 18 months.

Experts believe that the expectation is based on excess capacity and lower demand in China.

Rio Tinto's chief economist Vivek Tulpule forecast a steady decline in iron ore prices to just above $100 a metric ton by September 2014, according to a report in the Herald Sun.

"Rio Tinto's forecast is based on future iron ore demand from China, the country that consumes half of the global iron ore resources," said Wang Guoqing, deputy director at the Lange Steel Information Research Center.

She said that China's steel industry will see a slower growth rate, which will lead to shrinking iron ore demand.

China's demand for the commodity is expected to increase 5.7 percent this year to 1.11 billion tons, said Li Xinchuang, deputy secretary of the China Iron and Steel Association.

Last year, China's iron ore imports grew 8.43 percent year-on-year.

Wang also said that the global iron ore production capacity is expected to increase, which will create severe oversupply in the market.