Iron ore prices are tipped to fall to around $US50 a tonne in the second half of the year because of weak steel demand and increased supply from Australia’s big miners.

The steelmaking commodity is trading at $US60 a tonne, down 2 per cent from last week, but prices are still up almost 40 per cent since the start of April.

The price of Australia’s biggest export earner recently hit a five-month high of $US65 a tonne which has been attributed to supply disruptions and stronger seasonal demand.

Chinese iron ore port inventories have fallen 20 per cent this year, but ANZ researchers believe the trend will reverse soon and lead to lower prices.

ANZ predicts the price will fall to $US53 over the next three months and stay below $US60 a tonne next year.

“We’re still seeing supply growth coming through in the market,” ANZ senior commodity strategist Daniel Hynes said.

“Roy Hill’s coming through and BHP and Rio have still got incremental gains from their expansions and Vale in Brazil has some expansions coming thorough so the supply side is still seeing growth and this against a backdrop of relatively weak demand.”

Mr Hynes does not expect to see an infrastructure-led recovery in China which has previously boosted iron ore prices.

House prices in China have recently been stabilising but construction activity has remained muted, meaning demand is expected to remain weak.

Investment Bank Citi forecasts the iron ore price will fall to $US48 a tonne in the third quarter and as low as $US38 in the fourth quarter.

Despite making a slight upwards revisions for its third quarter prices, Citi says it remains bearish on iron ore largely because of supply coming from Australia’s biggest mining companies.

“The key driver of this price decline is the continued acceleration in low-cost supply from Australia as Rio Tinto completes the expansion to 360 million tonnes per annum and Roy Hill is commissioned in late-2015,” Citi says.