* Australia cuts iron ore, metallurgical price forecasts
* Cites mounting competition to sell into China steel market
* Says many coal mines in the red at prevailing prices
(Adds BREE, analyst quotes, details)
By James Regan
SYDNEY, June 25 Australia revised down its 2015
iron ore and metallurgical coal price forecasts as rising output
of two of the country's biggest export earners outstrips demand,
raising concerns for mining companies already struggling with
shrinking profit margins.
Robust growth in export tonnages meant Australia would still
post an 11 percent rise in total export earnings for mineral and
energy comodities in 2013-14, the Bureau of Resource and Energy
Economics (BREE) said in a quarterly update.
Analysts warn, though, that Australia's powerful mining
industry is facing a prolonged stretch where commodities will
fetch prices well below those of the now-defunct mining boom
BREE lowered its price forecast for iron ore to an average
$94.60 a tonne in 2015 from a previous forecast of $100.80,
citing growing competition to sell into China's steel market.
Although steel production in China is forecast to increase
in 2015, competition among iron ore exporters to sell their
additional production is expected to intensify, it said, while a
strong Australian dollar would also drag on local miners.
"This will draw a sharp focus towards managing costs and
enhancing productivity in the sector," said Wayne Calder, deputy
executive director of BREE.
The warning comes a day after the world's biggest miner, BHP
Billiton, said it was looking at more job cuts at its
flagship Australian iron ore division as pressure mounts to rein
The Reserve Bank of Australia cited the drag from lower
commodity prices when it kept interest rates at record low of
2.5 percent this month, with the market expecting rates to stay
low for many months to come.
BREE's forecast iron ore price for 2015 is just above the
current price of $93.30 .IO62-CNI=SI, following a 30 percent
price drop this year. However, exports in fiscal 2014/15 were
forecast to rise 13 percent to 720.7 million tonnes, BREE said,
just below its previous estimate.
Jefferies has cut its earnings estimates for iron ore miners
by 5-9 percent below consensus between 2014 and 2016, owing to
expectations ore prices will continue to weaken as supply
"This tsunami of supply is still rolling in, and supply
growth is likely to be substantial until 2016," it said in a
BREE also forecast a sharp dip in metallurgical coal prices
to $118.90 a tonne in 2015, well down on its March forecast of
$134.60. It slightly increased its forecast for exports to 180.5
million tonnes in 2014/15, just up on a year earlier.
Commissioning of new coal mines has more than offset lost
production from ones that have closed, BREE said, but many
producers were unprofitable at prevailing prices.
"This demonstrates the business of mining bulk commodities
like coal and iron ore is almost exclusively the domain of big
producers, which can benefit from their large economies of
scale," said Minelife analyst Gavin Wendt in Sydney.
(Additional reporting by Wayne Cole in SYDNEY; Editing by