Iron ore prices will fall 10% this year from 2015, the World Bank said in its latest Commodity Markets Outlook.
The bank is forecasting prices of $50/dry mt this year, down from $55.80/dmt last year.
It expects prices to average $51.50/dmt in 2017.
Iron ore prices rose 3% in the first quarter, driven by a 33% increase in February/March amid spiking Chinese steel prices as mills restocked.
Some disruption to supply also tightened the market.
"Prices continued to rally in April driven by renewed growth prospects in China, especially following the government's added stimulus measures and revival of construction," the bank said in its outlook.
Significant volumes of low-cost capacity are expected over the next two-three years, so further closure of high-cost production is required to balance the market.
A further slowdown in China, above anticipated production and depreciation of currencies in key supply basins, could present downside risks to its forecast, the World Bank said.
"Upside risks are centered on stronger global demand growth and supply shortfalls from project delays, operational disruptions, falling ore grades, environmental constraints and greater closure of high-cost capacity," it said.
