Cheaper oil, weaker producer country currencies, and industry-specific deflation point to lower mining costs in 2015 and beyond. But with lower costs come lower prices. We've reduced our U.S. dollar-denominated forecasts for copper, coal, and iron ore accordingly.
Cost mix and currency exposure differences mean larger cuts to our price forecasts for coal and iron ore than copper. Freight is a larger share of total costs for these bulk commodities, so the recent cut to Morningstar's long-term oil price, from $100 per barrel Brent to $75, generates more cost relief.
Similarly, we estimate higher local content, mainly labour and services, for coal and iron ore compared with copper. Local currency weakness therefore drives relatively lower U.S. dollar costs for labour and services. We estimate the impact of a stronger U.S. dollar for each commodity based on the depreciation of key producing country currencies. For coal, our long-term forecast for thermal prices falls 11%, from $75 to $67 in real terms.
Our long-term forecast for benchmark hard coking coal also falls 11%, from $133 to $118. In both cases, while we expect the eventual roll-off of take-or-pay infrastructure contracts to tighten supply, weakening Chinese coal demand is likely to circumscribe any upside. For iron ore, we now expect benchmark prices to average $60 for most of this decade, down 14% from $70; both figures in real 2015 terms.
We expect prices to nudge up slightly to $64 by 2020. We maintain our view that Chinese steel demand has peaked, preventing any meaningful price recovery for iron ore. For copper, our long-term price forecast falls a more modest 8%, from $2.67 per pound to $2.46.
Because oil comprises a lower share of the total cost of producing copper, lower labour and services costs account for a larger share of the reduction to our copper price forecast. The trajectory of Chinese demand remains the key source of uncertainty in our price forecasts.
