News: UPDATE 1-Australia cuts 2016, 2017 iron ore price forecasts

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    • Australia cuts 2016, 2017 iron ore price forecasts
    • Says demand growth slowing
    • Sees price averaging $44.20 in 2016

    (Adds more forecasts, details)

    SYDNEY, July 8 (Reuters) - Australia on Friday cut its 2016 price forecast for the country's biggest export earner iron ore by nearly 2 percent to well under current prices, citing concerns over slowing growth in demand and said it sees little change in 2017.

    The department now sees iron ore averaging $44.20 a tonne this year versus a $45 forecast in March and a December forecast of $40.40.

    "Despite the large movements in prices, the market fundamentals are broadly unchanged - demand growth is slow and the market remains well supplied," Australia's Department of Industry, Innovation and Science said in its latest quarterly commodities paper.

    Iron ore <.IO62-CNI=SI> was trading at $55.20 a tonne, according to the latest quote from The Steel Index. The iron ore price averaged $48 a tonne in the first six months of 2016.

    Morgan Stanley recently lifted its 2016 forecast by 17 percent to $46 a tonne and the outlook for next year was raised by 13 percent to $42.

    However, Morgan Stanley’s $35 a tonne forecast for the fourth quarter of 2016 indicates the bank still expects iron ore to sink below last December’s low of $37.00.

    Dragging on sentiment are hefty stocks of imported iron ore sitting at major Chinese ports. Inventories stood at 102.55 million tonnes on July 1, the highest since December 2014, according to data tracked by SteelHome SH-TOT-IRONINV.

    Australia, the world's largest exporter of iron ore, also warned the steel-making ingredient will also be slower to recover in 2017 than previously expected due to oversupply.

    It forecasts a price of $44 a tonne in 2017 versus its previous forecast of $55.

 
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