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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Symbol Name Price Change % Volume
BHP BHP Billiton Limited 34.96 -0.06 -0.17 2,985,731
GS The Goldman Sachs Group Inc. 174.67 0.16 0.09 2,004,401
PRRUF Prima Biomed Ltd Ord 0.02 0.00 0.00 0
RIO Rio Tinto Plc 32.87 0.45 1.39 3,523,873


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