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Pundits are predicting a massive decline and a new low for iron ore.
Vice president for Citigroup’s China commodities research group, Ivan Szpakowski, has pointed to a new recent low for the metal of US$40 per tonne next year, according to the Sydney Morning Herald.
it comes as the price of iron ore hits its lowest point since late July, and the benchmark 62% Fe import price at the port of Tianjin fell to the US$52.50, although it is yet to reach the seven year low seen in early July of US$44.59.
According to Szpakowski, the slowdown in Chinese demand coupled with oncoming oversupply thanks to record production rates from Vale and BHP is likely to drive down the price below US$50 per tonne by the end of this year, and to US$40 per tonne or lower by the end of the March quarter next year.
It comes on the back of the World Steel Association Short Range Outlook (SRO) for 2015 and 2016, which forecast that global steel demand will decrease by -1.7% to 1,513 Mt in 2015 following growth of 0.7% in 2014, and in 2016, it is forecast that world steel demand will show growth of 0.7% and will reach 1,523 Mt.
Hans Jürgen Kerkhoff, Chairman of the World Steel Economics Committee explained, “It is clear that the steel industry has, for the time being, reached the end of a major growth cycle which was based on the rapid economic development of China.”
“The steel industry is now experiencing low-growth which will last for the time it takes for other developing regions of sufficient size and strength to produce another major growth cycle,” he said,
“We expect the current headwinds to moderate in 2016 but this is based on a belief that the Chinese economy will stabilise.”
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