SINGAPORE – Iron-ore will weaken next year as global supplies increase including from a new mine in Brazil at the same time that steel production risks topping out in China, according to Goldman Sachs Group, which expects prices to decline back toward $50 a metric ton. Futures fell.

The raw material may fall to $60/t in three months, $55/t in six and $50/t in 12, according to the New York-based bank’s projections, which suggest a second year of lower prices after they dropped in 2017. Benchmark ore with 62% content was last at $67.76 a dry ton, according to Metal Bulletin.

The forecast for lower prices “is mainly because we see steel production in China peaking and should fall going forward and iron ore supply is still growing, with S11D ramping up,” analyst Hui Shan said in an email to Bloomberg, referring to Vale SA’s giant new mine.

Iron-ore investors have endured a volatile ride this year as prices swung in a wide arc on policy shifts in China, where officials are curbing steel supply to cut pollution, as well as on prospects for extra output from miners. The mainland’s environmental cleanup has buoyed prices of steel, aiding mills’ profitability, and prompted speculation that the trends enable users to pay more for iron ore. That’s not an argument Shan finds persuasive.

Iron ore prices should be determined by their “own supply-and-demand dynamics, not how much buyers could potentially pay,” said Shan. Steel margins have been high for an extended period, and they’re high precisely because of policy-driven output cuts, which depress iron demand, Shan adds.

The Chinese reforms, including the winter restrictions on steel production, are impacting both the short-term demand and pricing of bulk raw materials, but may set a platform for a spring rebound, according to an outlook from BHP Billiton Ltd. on Tuesday. The world’s largest mining company also affirmed its view for sustained growth in global steel demand over the next decade.

China is the largest steel producer, accounting for half of global supply. Australia has forecast the nation’s production will ease from an estimated 841-million tons this year to 830-million in 2018 and 820-million in 2019, according to projections from the Department of Industry, Innovation and Science.

At the same time, supplies of iron ore are expected to increase in 2018. Exports from Australia, the top shipper, will rise to 872-million tons in 2018 and 895 million in 2019, while cargoes from Brazil gain to 403-million and 419-million, the department forecast in its latest quarterly study.

Among the sources of new output is S11D, which is enabling Rio de Janeiro-based Vale to boost supply, especially of higher-grade material, and reduce costs. Vale is churning out record quantities of ore, including 95.1-million tons in the third quarter, as it ramps up the $14-billion project.

Futures in Asia dropped on Wednesday, with the most-active contract on the Dalian Commodity Exchange trading lower for a third straight day. In Singapore, iron ore for December on SGX AsiaClear lost as much as 1.2% to $65.90/t, and traded at $66.55/t at 9:57 a.m.