Goldman Sachs JBWere Pty deepened its contract iron ore price forecast to a record 40 percent decline because of slumping global steel production. Prices for benchmark Australian iron ore may drop to $55 a metric ton in the year starting April 1, down from a record $91 this year, Goldman Sachs analysts led by Malcolm Southwood said in a report yesterday. 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 major contract suppliers of iron ore will eventually be forced to concede bigger than previously expected price cuts,” the report said. “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. A 40 percent decline would be the biggest drop in Australian iron ore prices on record and comes after six consecutive years of gains, Goldman said.

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