More Sites

Iron ore prices forecast to drop sharply

Reported by AAP
Wednesday, March 21, 2012
Topics in this article:
Bhp Billiton,Rio Tinto
World's kookiest billionairesBillionaires and their eccentric and outlandish publicity stunts.

The high iron ore price is unsustainable and will fall substantially in coming years as China's use of steel becomes less intense, an analyst warns.

Current elevated prices for iron ore are unlikely to persist because Chinese demand is poised to soften, says Laura Brooks, a consultant for the steel-making raw materials unit of commodities market analysts CRU.

"We don't expect conditions to revert to pre-2003 levels but we do expect a persistent slowdown in the foreseeable future," Ms Brooks told a conference in Perth on Wednesday.

"We do expect China's demand to eventually cool - so not any time soon but in the foreseeable future.

"And when I say cool, I mean not as we've seen recently, but a persistent and significant slowdown.

"China shows no sign of a significant slow down as yet."

CRU expects Chinese demand will remain robust and supply tight over the immediate term as new iron ore projects are likely to continue being pushed back due to funding and infrastructure constraints, Ms Brooks says.

However, after 2015 the Chinese economy and accordingly steel use will begin to mature, while Indian economic growth, although strong, will not fully compensate for the slowdown in Chinese iron ore consumption.

"We don't expect change straight away but we do expect the main transition to be post-2015 and the transition to be complete by the 2020s," she said.

BHP Billiton on Tuesday said Chinese iron ore demand had started to flatten but there was a price "floor" of $US120 tonne, based on the cost of domestic iron ore production in China.

Rio Tinto said it was confident the Asian superpower would have a soft landing.

20/10/2014 20:42Sydney, Australia. 20 October,2014
advertisement