Fitch Solutions: The price of iron ore is still falling for many years, only 52 USD/ton by 2030

Iron ore prices in recent days have dropped below 90 USD/ton, much lower than the average level in the latest forecast of Fitch Solutions. According to Fitch's update, the average iron ore price this year and 2022 is $155/ton and $110/ton, respectively, compared with $170/ton and $130/ton in the previous report.

According to Fitch, in the first half of this year, the demand for iron ore increased due to the recovery of the Chinese economy, the strong construction sector.

However, the goal of reducing emissions to the environment and the impact of the last crisis have affected steel production. Besides, the liquidity crisis of real estate group Evergrande caused a decrease in steel demand, leading to a decrease in the use of iron ore.

In terms of supply, ore production is improving in Brazil and Australia. Vale will have a capacity of 330 million tons this year. In the first and second quarters, output was 68 million tons and 76 million tons, respectively, both increasing year-on-year.

This year, Fortescue will produce 182 million tons and next year, output will be 180-185 million tons. BHP Group will reach 253.5 million tons in 2021.

With data from large corporations, Fitch expects the supply to be abundant at the end of 2021 and 2022.

Given the developments in the market, the organization forecasts that iron ore prices will continue to decline for many years.

"We think ore prices will continue to decline as China's steel production growth cools and higher output from global mills," Fitch said.

In the long term, Fitch believes the ore price will drop to $65/ton in 2025 and $52/ton in 2030.

NDH