03-11-2017

Iron ore spot prices to trend around $60/mt in 2018: National Australia Bank

Iron ore spot prices for 62% ore in China are expected to trend around $60/mt CFR in 2018 after retreating from around $78/mt to $60/mt in September, the National Australia Bank said in its Minerals and Energy Outlook Thursday. “The rapid fall coincided with weaker orders from Chinese steel mills ahead of upcoming capacity closures, while sell side speculators appeared to return to the futures market,” NAB said in the report.

Prices remained relatively stable in October, trading within a range of around $4/mt over the month, it said.

NAB forecasts the iron ore spot price to average $62/mt over October-December and in 2018, at $60/mt over January-March, $62/mt over April-June, $61/mt over July-September and $60/mt over October-December.

While China’s steel consumption has accelerated in recent months, it is expected to slow in coming months, NAB said.

“From May onwards, apparent consumption — based on production, trade and stockpiles — pushed above 68 million mt/month, compared with the previous high of around 65 million mt in mid-2014,” NAB said.

The increased consumption was driven by Chinese construction activity accelerating from early 2016, but that was now expected to slow.

“Chinese authorities have tightened policies across a range of cities — including tighter eligibility requirements for [house] purchasers and stricter lending policies,” it said.

“Global markets offer little opportunity for Chinese steel producers. In the first nine months of 2017, steel exports have dropped sharply, totalling 59.6 million mt, a year-on-year fall of 30%. While some of this trend may reflect strength in domestic consumption, it also reflects the growing impact of protectionist trade measures,” it added.

Source: Platts

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