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10 April 2017
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The Australian reported that global iron ore market faces a prolonged period of oversupply that will drive a sharp fall in iron ore prices over the rest of this year, one of the Chinese steel industry’s most senior voices has warned.
Mr Li Xinchuang, the vice-president of the China Iron and Steel association, told the Global Iron and Steel Forecast Conference in Perth that he expected to see iron ore prices fall to as low as USD 55 a tonne later this year. He warned that the strong production at the world’s iron ore majors, the continued ramp-up of Vale’s big S11D deposit in Brazil and Hancock Prospecting’s Roy Hill mine, and the government-ordered closure of some of China’s steelmaking capacity would combine to force iron ore prices lower.
Mr Li said that “It is predicted that world iron ore supply will increase by about 50 million tonnes. (Combined) with reduction of Chinese steel industry, it is inevitable to see a downturn of iron ore demand, which cannot be compensated by other countries or regions over a short term. Thus oversupply will still be the condition of the world iron ore market.”
Mr Li previously correctly warned that Chinese steel consumption would peak at just over 700 million tonnes back in 2014, confounding the earlier expectations from the likes of BHP Billiton and Rio Tinto that Chinese steel demand would eventually climb to 1 billion tonnes a year.
He also noted that the use of scrap metal would grow rapidly in the coming years into an important substitute for iron ore.
On a brighter note for Australian producers, Mr Li said China’s high-cost iron ore mines would struggle to compete with seaborne suppliers of iron ore. He said that “The Chinese market will be served mainly by imported iron ore over a long period.”
Source : THE AUSTRALIAN
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