Iron ore mines in China will close down should prices drop toward $70 a metric ton, potentially creating a base for prices of the steel-making raw material, according to Australia & New Zealand Banking Group Ltd.

“Substantial domestic iron ore mine closures would occur between $70 to $75 a ton, creating a floor,” the bank said a report dated today, citing findings from a recent visit to the world’s largest steelmaker. “Opportunistic Chinese steel mill restocking is not occurring at low prices and highlights how difficult near-term steel conditions must be on the ground.”

Slowing steel-demand growth in China, which buys about 67 percent of seaborne ore, and surging low-cost supplies from BHP Billiton Ltd. (BHP) and Rio Tinto Group (RIO) spurred a 44 percent drop in prices this year as a glut expanded. The raw material may drop below $60 next year, forcing less competitive mines worldwide to cut production, according to Citigroup Inc. HSBC Holdings Plc predicts a 30 percent slump in Chinese output in 2015.

“The mood in iron ore remains bearish,” ANZ said in the report today, after cutting its forecasts for prices through 2017 in a research note on Nov. 10. “Prices continue to breach support levels previously thought strong.”

Ore with 62 percent content delivered to Qingdao in China fell 0.3 percent to $75.98 a dry ton today, data by Metal Bulletin Ltd. shows. The steel-making ingredient fell to $75.38 on Nov. 6, the lowest since September 2009.

Revised Forecasts

The raw material will average $78 a ton in 2015, down from an earlier forecast of $101, ANZ Head of Commodity Research Mark Pervan wrote in the Nov. 10 report. The 2016 forecast was cut to $85 from $95 and the 2017 outlook was reduced to $89 from $94, Pervan wrote. While prices won’t drop below $70, they are unlikely to recover to more than $100 again, he said.

Iron ore prices will rise again over time, Rio Tinto Chief Executive Officer Sam Walsh told Sky News Television today. In the long term, the market won’t be oversupplied all the time, Claudio Alves, global director of ferrous marketing and sales at Vale SA, said Nov. 7. The companies, the largest producers, are boosting low-cost supplies from Australia and Brazil.

Inventories held at ports in China rose 1 percent to 107.4 million tons as of Nov. 7, expanding after five weeks of declines, according to data from Shanghai Steelhome Information Technology Co. That’s 24 percent higher this year.

“Chinese port stockpiles will be the short-term bellwether and although we have seen a slight build in mid to late October, we expect traders to return and draw down levels through November for seasonal restocking,” ANZ said today. “This should create a short-term relief rally for bulks.”

Global output will exceed demand by 100 million tons this year from 16 million tons in 2013, HSBC said in an Oct. 22 report. Chinese production will tumble from 339 million tons this year to 236 million tons in 2015, HSBC said, citing figures in 62 percent ore-equivalent terms.