Iron ore weakness to continue into 2025 and beyond, says Fitch Solutions’ BMI
Looking beyond 2024-2025, BMI analysts maintained their view that iron ore prices will likely follow a multi-year downtrend.
The Northern China import price of 62% Fe content ore gained 2.7% on Monday, reaching $92.7 per dry metric tonne, the highest since mid-August 2014 according to data supplied by The Steel Index.
After a 85% rise in 2016, the price of iron ore has improved by over 16% so far this year and has more than doubled in value since hitting near-decade lows at the end of 2015.
The rise in the price of the steelmaking raw material has flummoxed market observers given supply growth expected in 2017, record-setting inventory levels at ports and an uncertain outlook for demand from China.
FocusEconomics in its January survey of analysts and institutions shows the price of iron ore averaging $56.70 a tonne during the final quarter of next year. For Q4 2018, analysts expect prices to moderate further to average $55.70 over the three month period.
None of the analysts foresee iron ore holding at today’s prices – Dutch bank ABN Amro is the most optimistic calling for a $76 average towards the end of 2017 while London-based Investec sees an average of $71.50 over the cours of this year.
BMO Capital Markets see prices correcting sharply from today’s levels to average $45 by the start of 2018 while Oxford Economics expects iron ore to average $53 this year and below $50 in 2018.
Imports by China continued to strengthen in 2017 after hitting an all-time high last year.
Trade figures released earlier this month showed China imported 92 million tonnes of iron ore in January, up 12% or just less than 10 million tonnes compared to a year ago. Shipments for January were the second highest on record valued around $7 billion.
The all-time record for monthly Chinese imports in terms of volume was in December 2015 with shipments totalling 96.3 million tonnes. But the price of iron ore fell to below $40 a tonne, the lowest in nearly a decade during that month, pushing the value of shipments below $5 billion.
The all-time record in terms of dollar value was set in January 2014, when the country imported $11.3 billion worth of iron ore back when prices were firmly in triple digit territory.
Forging more than half the world’s steel, Chinese imports of iron ore for the full year 2016 topped one billion tonnes for the first time. The 1.024 billion tonnes constitute a 7.5% increase over the annual total in 2015 and is indicative to what extent exporters from Brazil and Australia has been able to displace high-cost domestic producers.
2 Comments
Equinox
The answer is in part China’s mill closures which link directly to the Chinese government’s new pollution regulations which have fundamentally affected a rise in steel prices, triggered demand for higher quality ore to both meet new mill regulations as well as meet China’s infrastructure demands. As far as the crystal ball gazing ‘analysts’ go, I’d be listening to all those that predicted the GFC. That would be precisely none of them. If an ‘analyst’ can’t predict a global economic collapse then their chances of producing an accurate commodity forecast would be less than zero if that was at all possible.
@PhilMcCoxwell
I would stay the hell away from anything related to China. The reason we are in the shape we are in today is because of the phony chinese economy….which begets the phony American economy and so on…… worldwide currencies have become weaponized, diluted, devalued and destroyed from the money changers. It’s time to peg to gold and put the crooked bankers back on a leash.