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.
Renewed optimism about the strength of Chinese demand saw iron ore and steel prices spike on Wednesday after statistics showed the economic rebound in the world’s top commodities consumer accelerating into 2017.
The Northern China import price of 62% Fe content ore rose 4.2% to trade at $92.1 per dry metric tonne according to data supplied by The Steel Index after the world’s most traded steel futures contract – Shanghai rebar – jumped to the highest since February 2014. Volatile trading on the Dalian Commodities Exchange saw domestic iron ore price surge 5.5% to triple digits on Wednesday.
The Statistics Bureau of China said yesterday industrial production led by the construction industry jumped 6.3% in January and February of 2017 (released together to smooth out distortions in the data caused by the Chinese new year).
Beijing’s policies to clean up and consolidate the domestic steel industry is also playing into the hands of iron ore miners
Fixed asset investment shot up by 8.9% compared to 8.1% for 2016 as a whole thanks to strong private sector investment.
After a 85% rise in 2016, the price of iron ore is up another 16% this year and has more than doubled in value since hitting near-decade lows at the end of 2015.
China forges as much steel as the rest of the world combined and completely dominates the 1.3 billion tonne seaborne iron ore market.
Beijing’s policies to clean up and consolidate the domestic steel industry is also playing into the hands of iron ore miners with low grade furnaces – particularly those that use scrap – being forced out of business. Authorities are also clamping down on pollution from sintering plants, a necessary extra step when using low grade ore (domestic Chinese iron content averages only about 20%) to make steel.
While worries about supply and stockpiles at record highs have plagued the market, imports by China continued to strengthen in 2017 after hitting an all-time high last year.
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 digits
Trade figures released last week showed China imported 83.5 million tonnes of ore in February, up 13% compared to last year.
Total imports for January-February climbed 12.6% to 175.3 million. Iron ore is averaging $84.90 a tonne in 2017, compared to less than $45 during the first two months last year.
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 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. 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.
