Morgan Stanley this week sharply cut its forecast for the iron...

Morgan Stanley this week sharply cut its forecast for the iron ore price in the third quarter with the investment bank now seeing an average of $50 over the period, climbing to $55 in the final three months. For the year as a whole Morgan Stanley sees the commodity averaging $63 compared to a year-to-date average of $74. Iron ore is expected to continue to soften averaging $58 next year and $54 in 2019.

The latest forecast from the Morgan Stanley is more optimistic than predictions in a research note Citigroup released last week. The bank lowered its price outlook by a fifth saying iron ore will average $48 a tonne in Q4 2017, down from $60 in its previous prediction:

Both analysis blame growing global supply – most notably from Vale's S11D mine and Roy Hill in Australia hitting full production – for the weak outlook. According to Citigroup, 2017 will see a surplus of 118m tonnes following a more than 60m tonnes glut last year. Morgan Stanley predicts nearly 40m tonnes of oversupply this year, growing steadily to top 120m tonnes in 2019 and 185m excess tonnes in 2021.