Iron Ore to trade at $110 as Chinese investments keeps demand high – ANZ

The iron ore market has been well supported by ongoing supply issues and a robust Chinese steel market. Even though these issues are abating, sentiment remains strong, as the steel industry looks towards further support from stimulus measures in China. Iron ore prices are likely to remain high until there is real evidence of stimulus measures being eased. Economists at ANZ Bank have updated their target to $110/t and only see prices easing back below $100/t towards the end of the year.

Key quotes

“Sentiment remains positive in the iron ore market as stimulus measures in China promise to keep demand strong. The July Politburo meeting suggests a clear policy intention to speed up infrastructure investment in H2 2020.” 

“We expect China’s annual steel production to exceed 1B tonnes this year. That would amount to a growth rate of 4.8%, up from our original forecast of 1.5% growth at the start of the year. This should see the iron ore market remain tight in H2 2020.”

“We forecast the market will remain in deficit in Q3, before a pickup in demand and some seasonal weakness in demand push the market into a small surplus in Q4. This is unlikely to result in a sharp price correction if investors are convinced that China’s central government will release more stimulus.”

“We have updated our 0–3m target to $110/t and only see prices easing back below $100/t towards the end of the year.”