Grim iron ore prices expected in 2022

Tumbled iron ore prices continue to plant doubts amongst several analysts

While coal prices peaked, analysts expected iron ore prices to continue being grim in 2022. However, things may improve if China adheres to its 5-year urbanisation plans.

Saturated pessimism
Plummeting iron ore prices shook the globe in August 2021 at US$100/t. It sank to US$94/t in mid-September according to S&P Global Platts’ findings. They were prior averaging at US$200/t till July from robust steel production, partially attributed to China’s economic growth at 12.7 per cent in H1 2021.

With the drastic plunge, S&P took a conservative approach in its projections, and revised forecast for Q4 2021’s price to be at US$110/t. This was from an earlier US$145/t. Ronnie Cecil, an analyst from S&P Market Intelligence was not optimistic about recovery. Echoing S&P’s sentiments, Tom Price, Head of Commodity Strategies at Liberum Capital remarked, “We’re going to see prices struggle and return to around the $100/t level.” He even anticipated the rates are at risks of dipping to US$90/t.

Can urbanisation help in recovery?
Analyst John Tumazos from Very Independent Research expected China’s steel production curbs to remain through 2022. He said, “It suits their objectives to keep output low in 2022 and let it rebound in 2023 and 2024.” Some industry observers pointed out the upcoming 2022’s Beijing Winter Olympics in February might also be a reason behind the nosediving prices – to improve air quality.

On the other hand, China’s rapid urbanisation might mitigate the losses. Credit Suisse is optimistic about steel price recovery. The bank’s analyst, Matthew Hope said in relation to China’s 5-year urbanisation plan, “We expect Beijing to drive infrastructure hard next year to reach its 5-year targets, and that should help steel demand.”

Ronnie Cecil added, “Market Intelligence forecasts 2022 iron ore prices to average at $115/t, albeit with fluctuations. Major miners are largely not expanding production, resulting in tight supplies. Iron ore prices could jump if supply disruptions persist. It would not take much to cause another price spike.” Market Intelligence forecasted 2021 global iron ore supply to be at 2.4 billion tonnes and crude steel production at 1.98 billion tonnes, with China accounting for about half the world’s steel output. Despite that, there remains mixed sentiments across miners. Those who are profiteering would not reduce production. The same cannot be said for China’s domestic producers.

 

Marine Online News Team
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