Iron ore prices will fall to $90 a tonne over the next five years as demand for the steel-making ingredient wanes and a wave of new supply hits the market, Australia’s official commodities forecasting agency has predicted.

“The decline in prices is expected in response to moderating demand, particularly in China, and substantial supply increases from mining projects that are already under construction,” the Bureau of Resource and Energy Economics said in its quarterly report published yesterday.

The price of iron ore is critical to the global economy because it feeds through into the price of steel and goods such as cars and washing machines. It is also key to the profitability of large mining groups as well as steelmakers, including ArcelorMittal and Baosteel of China.