Commodities, Finance, Iron ore, News

What to make of the turbulent iron ore market

iron ore market

The iron ore market has been on a rollercoaster ride of late, and while there have been some signs of price recovery, the near-term outlook remains bearish.

After the price for 62 per cent seaborne Australian iron ore fines at the port of Qingdao fell below $US80 per tonne (t) on Monday October 31, the commodity recovered to $US87.8/t on Friday November 4.

But there continues to be downward pressures aplenty, with China’s ceaseless “zero-COVID” approach compounded by an ailing property market, sustained inflation, and the threat of a global recession.

Investment bank Citi has forecast the iron ore price to drop to $US70 per tonne before the end of 2022.

ANZ Research commodity strategists Brian Martin and Daniel Hynes said in a late-October note that Chinese property weaknesses would remain a headwind for steel and iron ore and that “supply-side issues have also weighed on the market”.

In its Federal Budget published on October 25, the Australian Government said it assumed the iron ore price would decline from $US91/t to $US55/t by the end of the March quarter 2023.

“Commodity prices are assumed to return to long-term fundamental price levels, causing a fall in the terms of trade in 2023–24,” the Budget said.

“Elevated coal, iron ore, metals and other ore prices are assumed to unwind over two quarters, by the end of the March quarter of 2023, to levels consistent with long-term fundamentals.”

The Australian Government’s Resources and Energy Quarterly for the September quarter forecast the benchmark iron ore price to cool from an average of $US110/t in 2022 to $US90/t in 2023 and around $US70/t in 2024.

China’s peak steelmaking body said last week that the country’s steel consumption fell 4.2 per cent to 741 million tonnes in the first nine months of 2022, with the overall downstream steel demand deemed “relatively weak”.

Declining iron ore prices led CuFe to cease operations at its JWD iron ore project in Western Australia in late October.

“With regards to our existing mining operations at JWD it is obvious at current iron ore prices the right thing to do is to suspend the majority of our operations on-site to preserve the value of ore in the ground for better markets,” CuFe executive director Mark Hancock said.

Undulating prices aren’t quelling exports, however, with 882 million tonnes of Australian iron ore set to be shipped in 2022, according to the Resources and Energy Quarterly. This is a 1.3 per cent rise from the previous year.

Australian iron ore exports are expected to rise by an average annual rate of 3.2 per cent to reach 959 million tonnes by 2024.

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