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Capital Economics alone predicts that the ore price will drop to $70/ton by the end of the year.
In 2022, iron ore prices continue to cool down
Rarely has a year like this year, Bloomberg commented.
Iron ore - a barometer for the Chinese economy and a driving force behind the AUD (Australian dollar), is having an extremely wild year.
The price of this raw material spiked to a record level of more than $230/ton in May, fell to $85 in November due to the Chinese government's pledge to reduce steel production, and is now up 50% in just one month. 6 weeks.
Analysts believe the volatility in iron ore prices will last until 2022, when China's steel output leveled off at the start of the year as Beijing tightened environmental standards in preparation for the Winter Olympics. in February.
In addition, iron ore will also face many other challenges. China is actively pursuing carbon emission reductions, steel production is expected to decline for the second consecutive year and the real estate sector is plunged into debt, which in turn weighs on steel consumption and increases. economic growth in general.
Iron ore imported from Australia and Brazil is located at a warehouse in Jiangsu province, China. (Photo: Getty Images).
Analyst Zeng Ning of commodity trading firm CITIC Futures said: "Demand for iron ore will gradually run out of steam. The real estate sector is very weak, steel consumption will certainly decrease and many factories will use it. scrap steel to reduce greenhouse gas emissions".
CITIC Futues predicts that China's steel production will decrease by about 50 million tons in 2022. China is buying about 70% of the world's iron ore and is expected to produce 1.03 billion tons of steel this year, accounts for more than half of the global supply.
Some bright spots for the upcoming iron ore market include the possibility of China issuing fiscal stimulus, easing monetary policy and further supporting the real estate industry; at the same time, steel production may increase as environmental standards are removed after the Winter Olympics.
Regarding iron ore prices in 2022, UBS Group predicts that the figure will average about 85 USD/ton, while Citigroup thinks the average price will reach about 96 USD/ton. Capital Economics alone predicts that the ore price will drop to $70/ton by the end of the year.
Elsewhere, analysts at Macquarie Group said that ore prices could rebound sharply in the first half of 2022 because current steel production in China is "unbelievably low". November's output fell to its lowest level since 2017.
"Hidden Dangerous Numbers"
Tomas Gutierrez, analyst at commodity consultancy Kallanish Commodities, warned that "there is still a lot of uncertainty" in the near term. The expert personally predicts that iron ore prices will trade below the $100/ton mark in 2022 but did not give specific numbers.
The global economic outlook is mixed, inflationary pressures from the energy price boom and supply chain disruptions are also lurking. The Omicron mutation is also a "dangerous unknown in the context that China still applies a zero-tolerance strategy to COVID".
For large ore miners, lower ore prices will reduce their profit margins, but still remain quite high.
However, for smaller businesses, projects that reopen this year when ore prices are hot may have to close. This could further increase the number of mines shutting down in 2021.
In particular, UBS analysts warn, ore miners in Australia, the world's top supplier of iron ore, may face higher costs and lower product costs this year. 2022.
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