Major iron ore producers will have to cut production like aluminum producers did in 1994 to halt the current slump in spot prices, investment bank Investec said in a note Tuesday.
"In our view if iron ore prices prevail at current levels something will eventually have to be done by the major producers to curb production," the bank's analysts, including Hunter Hillcoat, said.
It said even though Rio Tinto had recently declared it would pursue its plans for low cost expansion despite iron ore prices having fallen below the $40/dmt CFR China level, something had to be done about output.
The bank said its view on production cuts and the current supply glut reflected the "dire state of the iron ore industry".
Seaborne iron ore prices have almost halved since the start of the year, with the Platts 62% Fe Iron Ore Index, or IODEX, having fallen 46% to $39.05/dmt CFR North China Monday.
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