Facebook
Twitter
LinkedIn
Instagram
Youtube

Have iron ore prices peaked?

Team Veye | 21 Dec 2020

Have iron ore prices peaked?

Iron ore supply has increased over the last 10 years in response to China’s industrialization. Iron ore prices have been moving upwards on rising China imports. Although supply was expected to be strong in the current quarter, an improvement in finished steel prices and high steel production could keep the iron ore market largely supported.

Last year, it was being anticipated that Iron ore prices had peaked and will head lower as supply issues had eased and Chinese demand temporarily softened due to the yuan strength.

China makes about half of the world’s steel and imports more than 70% of the world’s seaborne iron ore. Many analysts were sceptical when Rio Tinto and BHP had predicted a few years back that China would produce 1 billion mt of crude steel by 2025-2030.

Coronavirus had put the supply chains at risk. Following the easing of government-imposed lockdowns companies have resumed operations thus increasing factory activity.

Recovery in China is expected to further fuel Iron Ore consumption. Chinese demand can remain strong as a result of infrastructure project constructions rolling on. The country is also ramping up infrastructure investment which is likely to see a strong steel demand and production gaining more momentum. Thus, the demand for iron ore is expected to remain strong.

In the next few years, there is a massive amount of new integrated steelmaking capacity planned for Southeast Asia. Majority of this being funded by Chinese companies, which could potentially benefit from Belt & Road Initiative borrowing terms.

In the meantime, established mills such as Vietnam's Hoa Phat are adding blast furnaces. Over time, the region could pick up any fall in demand for iron ore from China, Japan and South Korea.

Disclaimer

Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing reports. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.