SINGAPORE/MELBOURNE (July 8): The world’s biggest iron ore shipper cut its outlook for prices next year by 20 percent as the global market remains well supplied, loss-making mines are still churning out production and steel output in China is set to shrink further.

Iron ore is seen at $44.80 a metric ton next year, Australia’s Department of Industry, Innovation and Science said in a quarterly report on Friday. That compares with its previous forecast of $56 given in the March quarter. The prediction for 2016 was little changed at $44.20 a ton from $45.

Iron ore prices were whipsawed in the first half of 2016 after three years of declines, and remain 26 percent higher after construction activity in China picked up, supporting demand. Despite the large movements in prices, market fundamentals are broadly unchanged, according to the department, which forecast that while the nation’s iron ore shipments are set to increase further, export earnings would be flat.

“In 2017, iron ore prices are expected to recover more slowly than previously forecast,” the department said. “The revision is based on the assumption that loss-making operations may continue to produce for longer than previously expected. It also factors in increased supply from India and additional cost savings.”

Price projections by the department refer to spot ore with 62 percent content free-on-board Australia. The commodity delivered to Qingdao was at $55.07 a dry ton on Thursday, according to Metal Bulletin Ltd. Prices hit $70.46 in April, the highest since January 2015. Last year, it bottomed at $38.30.

Iron ore may average about $35 a ton through the remainder of the year and in 2017, S&P Global Ratings said Thursday as it lowered the outlook on Australia’s AAA credit rating to negative from stable. Australia’s government forecast in a May budget an average price through 2017 of about $55 a ton.