Goldman Sachs expects a clear deficit in the iron ore market during the rest of the year due to low inventories and a decline in production, and the bank also raised its price expectations.

The volume of recent fiscal spending in Beijing could be a positive sign for domestic growth sentiment, which is often linked to the construction industry, and thus higher demand for iron ore, the bank’s analysts noted in a report.

However, the US bank remains cautious in describing too much optimism related to rising steel demand from China’s faltering real estate sector.

The bank also expects a decrease in supply from the two main iron ore producers, Australia and Brazil, as its estimates indicate a decline in global iron ore supplies this year from 1.557 billion tons to 1.536 billion tons.

He also noted that declining iron ore stocks in China – which is the world’s third-largest producer – would contribute to the shortage.

As for prices, the bank expects the full-year average for iron ore to rise from $101 per ton to $117, and it also raised its expectations for next year from $90 per ton to $110.