BMI Cuts Iron Ore Price Forecast to $110/t

SEATTLE (Scrap Monster): BMI Country Risk and Industry Research is revising down its 2024 iron ore price forecast to an annual average of $110/tonne from $120/t, as subdued demand in China continues to exert downward pressure on the iron ore market, Kallanish notes. 

The Fitch group unit says in a note that it expects negative sentiment over the sluggish Chinese property sector, the downfall of which now looks irreversible, to persist, further capping prices.

"Our 2024 price forecast suggests that we expect prices to improve slightly from current levels towards the end of the year, leaving room for small upside, though contingent upon stimulus announcements from China," the research house says. 

According to BMI, iron ore (62% Fe content) prices at Qingdao Port are currently hovering below $100/t. They reached around $88/t as of 16 August, 2024, marking the lowest level since November 2022. Through Janaury-20 August, the Kallanish KORE 62% Fe fines index has averaged $114.71/dry metric tonne cfr Qingdao.

After remaining resilient early in 2024, iron ore prices have been trending downwards as weak Chinese demand shows no signs of reversing.

On the demand side, BMI notes steel production in China and thus demand for iron ore remain sluggish, with property sector weakness adding to the grim picture. It expects Chinese iron ore demand to remain lacklustre, given the ongoing challenges within the domestic property sector. Its Country Risk team believes that China's housing downturn is likely to last years, driven by an oversupply amid waning speculative demand.

Outside of China, it notes that steel production and demand for iron ore remain muted as of the first half of 2024. 

On the supply side, it says iron ore production remains healthy across major miners, which will work to limit the upside for iron ore prices. It notes that iron ore shipments and production broadly increased for most majors, with miners aiming to maintain their production levels. 

Over the long term, BMI expects iron ore prices to follow a multi-year downtrend, with prices forecast to decline to $78/t by 2033.

"We maintain our view that iron ore prices will consistently trend downwards, as cooling steel production growth and higher iron ore output from global producers will continue to loosen the market," it says. 

According to the research house, China's slowing demand growth will be the main driver of lower prices, a trend that is now already in its early stages. It notes that a structural shift away from industrial, steel-intensive sectors towards services and less-steel intensive infrastructure will have a negative impact on iron ore demand. This shift in China’s economic growth trajectory is expected to depress steel consumption and production growth rates, it adds.

 Courtesy: www.kallanish.com