Bloomberg reported that Goldman Sachs JBWere Pty deepened its contract iron ore price forecast to a record 40% decline because of slumping global steel production.

Goldman Sachs analysts led by Mr Malcolm Southwood in a report said that prices for benchmark Australian iron ore may drop to USD 55 a ton in the year starting April 1, down from a record USD 91 this year. It had forecast a 30 percent decline.

Goldman joins Macquarie Group Ltd in cutting price forecasts for iron ore this week. The worst recession since World War II has slashed demand for steel, sending stockpiles soaring at ports in China, the biggest maker of the alloy.

The report said that “The major contract suppliers of iron ore will eventually be forced to concede bigger than previously expected price cuts. Negotiations could be protracted and acrimonious.”

Goldman cuts its earnings per share forecast for Rio Tinto Group by 21 percent in 2009 and 30 percent in 2010. BHP Billiton Ltd.’s EPS forecasts were also reduced 3 percent this year and 15 percent in 2010, the report said.

(Sourced from Bloomberg.net)