Prices for iron ore tumbled this week, hitting levels close to those seen last in October 2009.

Barclays Bank estimates that, assuming Chinese steel production grows at 5.1% per year, there will be a surplus of 79 million tonnes of seaborne iron ore this year and 67 million tonnes next year. UBS estimates a surplus of 74 million tonnes this year, with a possible oversupply of 267 million tonnes by 2016.

Mr Philip Kirchlechner Iron ore consultant said that “While analysts believe prices will return to at least USD 95 per tonne towards the end of the year, volatility will continue. Two years from now, Brazil will put a big new mine into production. So in two years, you'll see again a pretty lumpy increase in output that will cause another slump [in] prices.”

He said that "So, this volatility will continue as supply tries to catch up with demand and then overshoots again, but in the short term I think prices will be pretty stable, around the USD 90 mark."