Iron ore prices surprised on the upside in Q2-16 but the spike to $70/t was built on fragile foundations and quickly passed. Our price forecast for H2-16 is $49/t CFR, marginally below the H1-16 price of $51/t CFR. In a market that is effectively ex-growth for the next 3-5 years, prices will have to fall in order to force out more high cost seaborne supply and/or Chinese domestic supply. We believe the low point of the current cycle will occur in 2018 with an annual average price of $43/t CFR (real 2016 terms). There is a growing risk that a global downturn could lead to a lower and more protracted price floor.