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Iron ore prices will fall to an average of US$120/t in 2013 before rising again to US$125/t in 2014, according to a study by Chile's state copper comission Cochilco.
The commission is estimating an average price of US$125/t for this year.
The price of iron ore fell 10% in 2012 due to a series of factors that resulted in a market surplus.
These include the larger than expected slowdown in the Chinese economy, the financial crisis in Europe that reduced demand for products and an increase in output as projects entered into production.
Next year will not be very different and the global surplus will continue into 2014, according to Cochilco.
Demand from China will also remain subdued, rising just 2% in 2013.
In the last five years, China has increased its consumption of iron ore from a 56.5% share in 2008 to 68.8% in October 2012, according to the report.
In 2011 global iron ore production was 2.93Bt, up 4.7% over the previous year. Output is expected to increase in 2012 by 3.5%.
HRC steel prices registered a fall of 14% in 2012 and the commission is forecasting an average price of US$651/t for the year.
China is the main consumer absorbing 44% and therefore the slowdown in the Asian country affected demand and consequently prices during the year.
The steel market will continue to be in surplus in 2013, although smaller than in 2012. The market is expected to enter into balance in 2014, according to the report.
Cochilco is forecasting a price of US$693/t for HRC steel to the Asian market in 2013 rising to US$716/t in 2014.
Despite the slowdown in demand from China and India, Cochilco believes that steel consumption in these countries will continue to grow in 2012-14, but at a slower pace than in the past.
Crude steel production in 2011 was 1.49Bt, up 6.2% from 2010. In 2012, production is expected to increase 2.9% to 1.54Bt.
To read Cochilco's full iron ore and steel market report, in Spanish, go to this link