Dalian iron ore futures gained last week as the prospect of Chinese stimulus and a recovery in steel demand lifted market sentiment amid the country’s faltering economic recovery.

“We note potential price support from pre-Golden Week holiday restocking over the next two weeks, but a continuing build in total iron ore stocks is setting the scene for another price drop in October,” analysts at the bank said in a note, referring to China’s annual week-long holiday next month.

Iron ore fuels China’s industrial sector, particularly steel production.

Goldman continued to maintain that the likelihood of falling exports posed a key risk to steel production in China in the coming year.

This could lead to a further drop in Chinese iron ore demand “given that we see increased support from domestic demand as unlikely”.

Despite reduced exports from India, the world’s fourth-largest producer of the steel-making ingredient, an oversupply of iron ore is persisting due to low demand, the bank said, adding that balancing the market would require lower-cost producers to also cut production.

But for this to happen, the price of iron ore needs to drop further, it said.

http://www.miningnewspro.com/en/News/629065/Goldman Sachs cuts Q4 iron ore price forecast by $15/t on supply glut