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Price of iron ore fell to $55/t

06 October 2016
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After exceeding $ 60 / t several times in August, the price of iron ore fell to $ 55 / t again with a tendency of further corrections.

 

In December last year, the price of iron ore was on the edge of profound when there was a question whether it will drop below $ 38 / t. or not. Despite the predictions, that didn't happen which favored a rapid recovery of iron ore value above $ 50 / t. In the past nine months the price of iron ore tried to break through the ceiling of $ 60 / t three times. After the first two failed attempts, the price quickly fell below $ 55 / t and later below $ 50 / t. In August, there was the third attempt when the price of iron ore managed to hold above $ 60 / t even for 17 days. Afterwards, the negative trend has occured and continued. The price is currently at $ 55 / t, but analysts believe that by the end of the year it will decrease by at least another $ 5 / t, which will cause great pressure on manufacturers of this basic raw material for steel production.

 

Volatility of iron ore price has affected the assessment of major banks and investment houses. Traditionally Goldman Sachs´ forecasts on future of iron ore pessimistic - only $ 36 / t for 2017. In contrast, JP Morgan forecasts average price of $ 54 / t for 2017. Most of the other analysts calculate that the price of iron ore will range between $ 40 / t and $ 50 / t next year, such as Fitch Ratings, which forecasts a price of $ 45 / t.

 

Iron ore price down to 55 $/tIron ore price chart (05.12.2015 - 06.10.2016.)

 

The expected decline in price of iron ore is based,among other things, on the fact that this and next year new plants and mines will be put into operation, while on the other hand there is growing concern about the continuing demand from China. However, there are people who believe that the forecasts are too pessimistic. The most notable is Fortescue Metals Group, which points out that the iron ore market behaves cyclically, and that there is no indication that the negative trend will continue. This is in compeletely opposite with the data claiming that Brazil and Australia will produce an additional 200 million tons of ore by 2020, which will burden the already over-saturated market.

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