Considering how bad the iron ore price predictions were a year ago, the batch of forecasts for next year should probably be taken with a tonne of salt which, incidentally, is a much more valuable commodity today than the steel-making ingredient.

Iron ore’s glory days are over. The price has fallen 50 per cent this year and is 65 per cent off its peak in February 2011.

A little late to the trend, most analysts have swung to a decidedly bearish tone, which in a normal, freely traded market would have the contrarians clamouring for a technical bounce.

Unfortunately for Australia and the miners, there has been no ability to sustain a rally since breaching $US100 a tonne in May. The 62 per cent benchmark for deliveries to Quingdao was last night worth $US66.94/t.

This is because Chinese port and steel mill stockpiles are not far off record highs and China’s Government remains steadfast in rebalancing growth away from investments that consume steel.

Almost two decades of rampant spending on infrastructure and urbanisation in China has run into the financial limit of debt saturation just as global miners reach peak production capacity.

Massive oversupply has been the primary cause for the plunge this year, but the big question for all commodity markets now, not just iron ore, is whether the demand side of the equation will meet the bullish growth forecasts of economists and mining executives who have invested billions in production capacity to meet it.

Worryingly, Peking University Professor Michael Pettis, one of the best China forecasters, has warned the study of 26 financial crises revealed that even the pessimists were wrong in forecasting the end of booms because they weren’t bearish enough.

And in China’s case, its growth transition has barely begun.

Bloomberg Intelligence Unit analyst Kenneth Hoffman outlined a bearish base case scenario in which demand contracted 2 per cent annually as China transitioned from an economy driven by construction to one powered by services and manufacturing.

In that case, Chinese steel demand may have already peaked in 2013 and the world would be awash in iron ore for the foreseeable future, Mr Hoffman said.

Easing the future supply overhang, he said, iron ore producers had cancelled or suspended 22 mining projects since July as prices plunged to a five-year low, which would help to curb or even eliminate a supply surplus. The cumulative cuts mean 140 million tonnes of extra capacity won’t now hit the global market over the next few years.

But the hoped-for washout of high cost producers could be slow. Despite the bear market for the commodity, more than 80 per cent of global output was still profitable, due in part to China easing taxes and tariffs on miners and energy prices falling, Mr Hoffman said.

The bearish analysts’ consensus for iron ore is about $US65/t, with some forecasting a dip to $US50/t. Backing that up, a simple projection of the trend in prices from $US20/t in the early 2000s suggests the long-term trend is around $US40/t to $US50/t.

JPMorgan strategists are forecasting 3.2 per cent a year steel supply growth versus 1.8 per cent demand growth to 2020 to reach their forecast for an average price of $US67/t in 2015 and $US65/t in 2016. But they see averages of $US75/t longer term.

“On a five-year view we expect significant high cost capacity to be idled in order to balance the market as production growth from the majors outstrips demand,” they said. “While this capacity has the potential to be reactivated, in our view, the break-even price for most of this production is above our incentive price of $US75/t.”

RBC Capital analyst Chris Drew admits to being wrong on seeing a bottom at $US80/t as weak steel prices, tight credit and ongoing supply strength continued to pressure iron ore prices down.

“We continue to forecast a recovery off current lows based on seasonal restocking, reduced Chinese domestic production over winter and reduced Q1 export supply from Brazil and possibly Australia on weather impacts,” he said.

“However, with a further 100mt supply growth through 2015, much of which is (second half) weighted, the first quarter is likely to be the peak in pricing for the year.”