Iron ore has enjoyed a good price run this year, even as other base metals have seen lackluster performance. Iron ore was at a yearly high of $158 in February, dropped down to $114.82 in June, but has risen again in the last two months. It was at $137.06 in August, an 11.5 percent climb since June, according to indexmundi.a According to the FT (subscription required), iron ore's average $136 per tonne this year is the second-highest on record. Not surprisingly, or perhaps surprisingly if one buys the headlines around China's GDP slowdown, the reason has to do with Chinese steel demand. The FT reports that Chinese steel production in May hit an annualized rate of 800 million metric tonnes, compared to annual production in 2012 of just 717 million tonnes. However, there are storm clouds gathering on the horizon for iron ore. Metal-Miner writes in Seeking Alpha that the huge ramp-up in supply from Australia is expected to add about 140 million tons of new capacity over the next two years. Brazil, too, will introduce much more product into the market than currently, having resolved much of the infrastructure problems at Vale's (NYSE:VALE) mines. But perhaps the biggest "elephant in the room" is India, reported MINING.com, in that India will soon be exporting a lot more iron ore to earn foreign currency due to the falling rupee. This will exacerbate the coming iron ore oversupply situation. The trend in India is the exact reverse of the government's intended purpose of cracking down on illegal iron ore production and hiking export tariffs to turn the country into a net importer of the steel ingredient. Then there is the demand side. According to Metal-Miner, strong steel production is putting downward pressure on steel prices, and inventories could begin to be drawn down, meaning less purchases of iron ore on the spot market. That has Standard Bank predicting iron ore will soon be in oversupply, and thataprices could fall to $125 per tonne, or even lower, over the next couple of years, said Metal-Miner.