A Rosier Outlook for Iron Ore Prices?

Michael Teague |

The World Bank on Friday provided the first positive forecast for iron ore prices in a while.



In August, Goldman Sachs (GS) and other investment banks estimated that, due to slower growth out of China restraining demand for the metal, prices would dip to under $100 per ton in 2014. This was both a sudden reversal of a trend that had, over the past few years, seen demand exceeding supply on a regular basis, and really bad news for the many mining firms such as BHP Billiton (BHP) and Rio Tinto (RIO) who had restructured their extraction/production operations to sate Chinese hunger for iron ore.

But data now shows that the Chinese economy had grown 7.8 percent during the recently-ended third quarter, up from 7.5 percent in Q2. Furthermore, Chinese iron ore imports increased to 74.6 million tons in September, a monthly record.

The World Bank projects that prices will hold around $134 per metric ton throughout the remainder of the year, and should stay around $135 per ton throughout the course of 2014, on their way to an average of $145 per ton in 2025.

There was a caveat in the report, however, as this scenario will only be possible in the event that Chinese demand is able to maintain the current rebound: “If robust supply trends continue and weaker-than-anticipated demand growth materializes, prices could follow a path considerably lower than the baseline presented in this outlook.”

[Image Courtesy of Wikimedia Commons]

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Companies

Symbol Name Price Change % Volume
RIO Rio Tinto Plc 40.98 -0.41 -0.99 2,046,949 Trade
GS The Goldman Sachs Group Inc. 223.53 1.06 0.48 1,787,060 Trade
BHP BHP Billiton Limited 35.84 -0.37 -1.02 1,350,535 Trade
PRRUF Prima Biomed Ltd Ord 0.02 0.00 0.00 0

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