Citi Bank has again cut its iron ore forecasts from $65/tonne to just $58/t for 2015 and from $65/t to $62/t in 2016. Citi was already the most bearish of the major banks and the revisions suggests the bank sees further declines and little upside in the year ahead.

Citi made waves in November 2014 when it said that iron ore would dip below $60/t briefly in the third quarter of 2015. Now it expects the average price for the year to be below that. Part of the reason is costs. The rout in oil prices is expected to reduce the costs of miners and cut freight rates.

Iron ore prices are also priced on a cfr China basis meaning they include freight costs. The shipping industry had hoped to benefit from the lower oil prices themselves but massive overcapacity at a time when Chinese demand is slowing has allowed miners to capture the margin. This is a story all too familiar to the steel industry, Kallanish observes.

Exchange rates are also undermining prices, with a fall in the Australian dollar and a larger decline in the Brazilian Real cutting miners’ costs further.

Citi also cut its forecast for coking coal prices by -7.4% to $113/t in 2015 and by -9.3% to $127/t in 2016.