[av_heading heading=’Iron ore market heading for a bumpy ride’ tag=’h3′ style=’blockquote modern-quote’ size=” subheading_active=’subheading_below’ subheading_size=’15’ padding=’1′ color=” custom_font=”][/av_heading]
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10 July 2017
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Iron ore markets are heading for a very bumpy ride in the next couple of years, marked by significant price swings amid the restructuring of the steel industry in China, according to the developer of a planned USD 3.7 billion mine in Australia.
Mr Andrew Stocks managing director of Iron Road Ltd whose partner in the mine, port and rail project is China Railway Group Ltd the world’s second-largest infrastructure builder said that “Extreme volatility is going to be a hallmark of the market for at least a year or two. We shouldn’t be afraid of that, that is just the way it is.”
Iron ore has swung from a bear to bull market all within three months, rebounding from a year low of USD 53.36 a metric ton last month on a surge driven by mills in China boosting purchases to replenish inventories, with higher-grade ore in demand. This volatility is the result of the Chinese market transitioning to a cleaner, leaner production phase, according to Stocks, who sees prices averaging about USD 70 a tonne over the longer term.
He said that “You have got a fair bit of iron ore around the world.: He added that this oversupply has led to record stockpiles sitting at ports and mills that may take a year to recede to a reasonable level.
BHP Billiton Ltd. last week said it sees a smoothing out of the recent volatility. The addition of low-cost supply coming from rivals including Vale SA’s S11D project will see less short, sharp shocks in the price, it said. Goldman Sachs Group Inc said the price is heading lower and Citigroup Inc. forecasts a slump back to the USD 40s.
Iron Road is in talks with China Development Bank, Industrial and Commercial Bank of China Ltd. and China Construction Bank Corp. about providing up to USD 3 billion in financing for the project that will produce about 20 million tons a year of iron concentrate, a higher grade product, for at least 25 years. A decision may be made within six to nine months, Stocks said.
Source : Bloomberg
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