Iron ore is heading towards its first surplus in at least a decade as output expands and Chinese steel mills, the biggest buyers, boost production at the slowest pace in 5 years.

According to the median of seven analyst estimates compiled, seaborne supply will advance 9.1% and demand 8.3% in 2013, led by exporters from Perth based Fortescue Metals Group Ltd to Vale SA, Morgan Stanley forecasts. A surplus will emerge in 2014 and keep widening until at least 2018, the bank predicts. Prices will slump as much as 34% to USD 90 a tonne by the end of December.

According to estimates from Morgan Stanley and economists surveyed, exports of the biggest seaborne cargo after oil are surging the most since 2010 after prices jumped as much as sevenfold in the past 9 years. Goldman Sachs Group Inc. expects China’s imports to climb 4% in 2013, the least in 3 years. Its steel output will expand 2.6% as the nation’s economy grows at the second-slowest pace in the past decade.

Mr Tom Price, the Sydney based analyst at UBS AG who has covered the market for about a decade, said that “We’ve got a steady lift of supply, mainly out of Australia. We’ve observed for a couple of years now moderation in demand growth in China. A combination of those two is why we’re bearish.”