Why iron ore prices and demand should be separated – by Jasmine Ng (Australian Financial Review – May 30, 2017)


Iron ore consumption in China will probably be sustained as Asia’s top economy builds out infrastructure, according to Mark Mobius, who highlighted what he sees as a difference between the industry’s relatively stable supply-demand fundamentals and large swings in prices.

“We’ve got to separate those two things,” the executive chairman of Templeton Emerging Markets Group said in an interview in Singapore, without giving a price forecast. “Supply-demand is one thing, price is another thing. Because the price is subject to all kinds of external factors, and the traders who are betting on the price going up or down or so forth,” he said on Monday.

Iron ore prices have been subjected to a wild ride in recent years – plunging in 2015, rebounding last year and sinking again in 2017 – as investors sought to gauge the impact of greater supply and the outlook for steel demand in China.

The gyrations have taken place against a backdrop of rising investor interest in futures in Dalian and Singapore, as well as a steady increase in China’s import demand and record steel supply. Government policies have influenced prices too, especially last year’s stimulus.

“I don’t see a big, big decline in the demand for iron ore going forward, I think there’ll be continuing demand not only in China but other parts of the world,” said Mobius, who’s spent more than 40 years tracking emerging markets. “If you look at Chinese imports of iron ore, it’s almost a straight line, continuing to go up,” adding that in contrast the price “is going all over the place”.

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