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.”
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