"Iron Ore Prices Average $157 This Year, Could Plummet to $70 by End of Next Year"

'Greenhouse Gas Reduction' in China Likely to Lead to Further Steel Production Restrictions

[Asia Economy Reporter Park Byung-hee] Bloomberg reported on the 21st (local time) that iron ore prices, which averaged $157 per ton this year, could fall to $70 per ton next year.

This is due to the high economic uncertainty in China, the world's largest iron ore producer and importer, and expectations that China will continue to limit steel production to reduce greenhouse gas emissions.

Iron ore prices showed extreme volatility this year. The iron ore futures price on the Singapore Exchange soared to a record high of $230 per ton in May but then plummeted to $85 last month. Over the past six weeks, it has surged again by 50%, currently aiming to recover to $130.

UBS forecasted the average iron ore price next year at $85 per ton, Citigroup at $96 per ton. Capital Economics predicted that iron ore prices could fall to $70 per ton by the end of next year.

This is because China is expected to continue limiting steel production to reduce greenhouse gas emissions. The ongoing instability in China's real estate market is also a negative factor. Since the real estate market accounts for 20% of China's GDP, a downturn could shake the entire Chinese economy and disrupt steel production. Moreover, the global economic uncertainty next year is high due to the tightening of monetary policies by major central banks amid inflation and the spread of the Omicron variant.

Jing Ning, an analyst at CITIC Futures in China, said, "China's steel production will decrease by 50 million tons next year," adding, "Demand for iron ore will also gradually decline."

China's iron ore production this year is expected to reach 1.03 billion tons, accounting for more than half of the global production. At the same time, China holds a 70% share of the global iron ore import market.

The optimistic point is that the Chinese government may take stimulus measures to prevent economic slowdown. On the 20th, the People's Bank of China, the central bank, lowered the loan prime rate (LPR), the de facto benchmark interest rate, for the first time in 20 months, raising expectations for stimulus. There is also a forecast that iron ore demand may increase as China relaxes steel production regulations after the Beijing Winter Olympics in February next year.

Macquarie Group stated that China's current steel production is too low to be sustainable and predicted that iron ore prices could rise significantly in the first half of next year.

This content was produced with the assistance of AI translation services.