Iron ore outlook looking stronger by the day: Fitch

iron ore

The iron ore price is forecast to remain above $US100 per tonne (t) into 2023, as Chinese demand increases and supply remains stable, according to Fitch Solutions.

The credit rating agency previously forecast the iron ore price would average $90/t in 2022, before falling to $75/t in 2023. However, this has been revised to $120/t and $110/t, respectively.

“While we expect iron ore prices to see some weakness in the coming days from spot levels over the Chinese crackdown, we believe this will only be temporary,” Fitch stated.

“In fact, we believe that prices will receive support from supply constraints and renewed Chinese demand strength in 2022, such that the annual average iron ore price for 2022 and 2023 will remain above pre-COVID-19 levels.”

The Chinese Government indicated it would renew stimulus towards the infrastructure sector as it was faced with slower economic growth, increasing demand for iron ore in the steelmaking process.

Also in favour of higher prices is Australian producers attempting to meet demand, as they’re faced with extended inclement weather.

The Bureau of Meteorology (BoM) has indicated the cyclical La Niña weather pattern could last until around April in the north and east of Australia, potentially affecting mining operations.

“As major miners are focussing on value over volume in FY22, with announced production targets still being subject to multiple risks (for instance, the Australian BoM has predicted an average to above average number of cyclones in 2022), we expect global iron ore supply to remain constrained this year,” Fitch stated.

Past 2023, Fitch predicts prices to decline below $100/t from 2025, hitting $50/t by 2031.

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