Iron ore prices slump on improved supply, lower demand

November 12, 2021 12:18 AM EST | By Arpit Verma
 Iron ore prices slump on improved supply, lower demand
Image source: Falling iron ore prices | Source: © Argus456 | Megapixl.com

Highlights

  • China forced its steel mills to lower their output during the winter season ahead of Beijing's Winter Olympics.
  • Australia and Brazil have started to loosen tight supplies of iron ore in the seaborne market.
  • The prices of iron ore are expected to decline from an average of US$155 per tonne in 2021 to US$65 per tonne in 2025.

The iron ore price rally has cooled down with prices tumbling below the forecasted range, extending its downward momentum below US$90 per metric tonne, the lowest since May 2020. The significant drop in the prices was underpinned by weak industrial demand in China due to curbs in the production of steel.

After enforcing steel production constraints in 2021, Chinese steel mills were forced to lower their output during the winter season ahead of Beijing's Winter Olympics. Furthermore, the country’s property sector is under pressure as the country tightens credit lines as Evergrande’s difficulties sparked contagion for other property developers of the country.

Improved supplies

While glancing on the supply side, improved production growth from Australia and Brazil have started to loosen tight supplies on the seaborne market. However, Brazilian miner Vale SA may take a longer time to return to pre-Brumadinho dam collapse capacity levels.

The miner is currently working at a production capacity of 330Mt. Vale’s Q1 2021 iron ore production was 68Mt, nearly 14.2% above Q1 2020 production.

 FMG Group

FMG Group | Source: © Timonschneider | Megapixl.com

Additionally, Fortescue Metals Group has also beaten its full-year shipment estimate in FY21 with a total volume of 182Mt.

While looking at the long-term outlook, iron ore prices are expected to follow a multi-year downtrend, as per the Fitch estimates.

Fitch forecasts that the prices of iron ore will decline from an average of US$155 per tonne in 2021 to US$65 per tonne in 2025.

Bottom Line

Iron ore prices tumbled to record low levels on the back of lower demand in China due to steel production curbs on environmental concerns and an improved supply from the iron ore producing nations.


Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Incorporated (Kalkine Media), Business Number: 720744275BC0001 and is available for personal and non-commercial use only. The advice given by Kalkine Media through its Content is general information only and it does not take into account the user’s personal investment objectives, financial situation and specific needs. Users should make their own enquiries about any investment and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media is not registered as an investment adviser in Canada under either the provincial or territorial Securities Acts. Some of the Content on this website may be sponsored/non-sponsored, as applicable, however, on the date of publication of any such Content, none of the employees and/or associates of Kalkine Media hold positions in any of the stocks covered by Kalkine Media through its Content. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used in the Content are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used in the Content unless stated otherwise. The images/music that may be used in the Content are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated or was found to be necessary.


Sponsored Articles


Investing Ideas

Previous Next
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.