Analyst ignores the pack, predicts iron ore price rise

At odds with other iron ore analysis of late, Westpac chief economist told a conference he expects the price to pick up to over $US100 a tonne next year.

Speaking at the Good Oil conference yesterday, Bill Evans said the price of the steelmaking ingredient would climb to over $US100 a tonne in 2015 before a probable rise to beyond $US120 a tonne by 2016.

Evans said that while China’s economy looked “pretty sick”, the government has started to adjust policy to stymie further economic pain.

““At the moment it’s not moving fast enough, but I think over the next few months that you’ll start to see a more aggressive policy approach in China. We’re starting to see a lift in credit, we’re also starting to see fiscal stimulus,” Evans said.

The price of iron ore has fallen by 38 per cent this year on the back of oversupply and sluggish Chinese demand.

The slump has claimed its first victim, with Western Desert Resources blaming its collapse on the weakened price.

While Evans' iron ore predictions will be welcomed by many in the business, it comes at odds with other market analysis.

Last week a Singapore-based analyst said prices could fall to lows of  $US75 a tonne next year.

Ian Roper from CLSA said the oversupply situation is only going to worsen over the next few years.

“For the first time in over a decade, the need to eliminate iron ore supply, rather than incentivize it, is determining prices,” Roper said.

Former BHP Billiton executive Alberto Calderon is also less than optimistic about a price rise, and told a conference that he expected the iron ore price to remain at between $US70 and $US80 a tonne for the next few years, The Australian reported.

Prices this low will see many  iron ore miners producing at a loss. 

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