Predicting any end to the collapse in iron ore depends mostly on how much you think will be needed to make steel in China.

Trouble is, some forecasts of steel output over the next few years are almost polar opposites, from a record surge to 1.1 billion metric tons to a plunge of more than a third to 500 million tons. The 600 million-ton difference in those estimates represents about enough metal to supply all of Europe, the Americas and the rest of Asia for a year.

Some owners of iron-ore mines including Rio Tinto Group and BHP Billiton Ltd. remainbullish and expect Chinese steel demand to grow. China-based J Capital Research Ltd.’s analyst Tim Murray and independent economist Andy Xie say steel output is already falling, a signal that a two-year slump in iron ore prices and the pressure on producer margins may only get worse.

“When you have such a wide divergence between forecasts, that does put investors into a difficult position,” said Edward Smith, Melbourne-based chief investment officer at LegalSuper Pty, which manages A$3 billion ($2.2 billion) and holds BHP and Rio shares. Variances “of that magnitude, and where we are talking about double the amount, that does seem unusual,” he said.

Bearish Outlook

For now, the bears are prevailing, with steel production in China poised for the first annual contraction since 1990. Iron ore is down 71 percent from a peak of $191.70 a metric ton in February 2011, and touched a low of $44.59 on July 8, according to a benchmark tracked by Metal Bulletin Ltd. It rose 9 cents to $56.31 a ton Aug. 12.

With Rio, BHP and Vale SA boosting output to protect market share, prices may slide into the $30s this year, said Xie, who accurately predicted more than two years ago that a glut of ore would send prices into a tailspin.

China’s economic expansion is the weakest in 25 years, reducing demand for steel in homes, roads and appliances. The central bank devalued the yuan on Tuesday and Wednesday, sending the currency to its steepest two-day drop in two decades and prompting investors to speculate the move was intended to revive growth.

Less Steel

Annual steel output in China, which uses about 70 percent of the world’s traded iron ore, may drop below 500 million tons in the next decade, compared with the government estimate of a record 823 million last year, Xie said. J Capital’s Murray predicts output at 600 million tons by 2018. At the same time, iron ore output is rising from lower-cost mines from Australia to Brazil.

Slowing Chinese steel output will be among factors that’ll cut the country’s demand for iron ore by more than 200 million tons over the coming decade, Citigroup Inc. said May 27.

Melbourne-based BHP expects Chinese steel production to reach as much as 1.1 billion tons in the mid-2020s, and plateau through 2030. Rio’s Chief Executive Officer Sam Walsh said this month the Asian country will produce 1 billion tons by 2030.

Crude-steel output in China surged 12-fold between 1990 and 2014 as millions of people moved from rural areas to cities and rising incomes fueled purchases of homes, cars and appliances. Morgan Stanley, in an Aug. 4 report, forecasts annual steel output in China will increase 4 percent to 855 million tons by 2020. Last year, China produced more steel than the U.S., Germany, Japan and Russia combined.

China’s Economy

China is the world’s most-populous nation and became the second-largest economy in 2009. Even with growth slowing, it’s expected to expand 7 percent this year, more than double the

Declining iron-ore inventories in China helped revive prices, which are up 26 percent from the low on July 8. The rally probably won’t last, Morgan Stanley said Aug. 10, forecasting third-quarter prices at $50 on average. Global supply will exceed demand in 2020 by 83.2 million tons, up from 58.1 million this year, the bank estimates.

Cliffs Natural Resources Inc., the largest U.S. iron-ore producer, said in April that the expanding global surplus made the $80 billion seaborne market a “horrible business.”

Perth-based Fortescue Metals Group Ltd. probably saw net income tumble 85 percent in the year ended June 30, according to the median of 20 analysts’ estimates compiled by Bloomberg. BHP’s net income for the same period is forecast to fall 43 percent. Rio saidlast week that earnings in the six months to June 30 fell 43 percent to $2.9 billion.

Australia, the largest iron-ore exporter, sees China’s steel production declining 1.5 percent this year on lower consumption growth and tighter environmental standards.

Falling Production

Even China expects demand for iron ore to slow. Production will fall to about 807 million tons this year and continue to decline as steel consumption in China tumbles to 600 million tons by 2030, according to Li Xinchuang, deputy secretary-general of China’s Iron & Steel Association.

Perth-based Mount Gibson Iron Ltd., one of the higher-cost producers, is seeking base-metals assets to diversify its business and has contingency plans to shutter existing iron-ore mines during a prolonged slump in prices.

“If steel consumption did drop, then the so-called mid-caps are in for a world of pain,” CEO Jim Beyer said.