Iron ore prices could stay depressed for 10 years A PROMINENT Chinese fund manager has grimly forecast that the global iron ore price could remain under pressure for 10 years as oversupply continues to hit the market and the Chinese residential property market slumps. Shanghai Jianfeng vice-president Liang Ruian believes prices could slide below $US60 a tonne within the next year and could even fall to as low as $US50 a tonne, with major consequences for miners around the world. The iron price on the weekend was $US71.32 a tonne, up $US1.34, but the commodity is down more than 50 per cent this year. The price slide has prompted miners to rethink capital expenditure plans and intensifies pressure on companies struggling to bring projects to the production stage. Mr Liang, a well known fund manager in Shanghai, said the price of iron ore would be heavily affected by the performance of the domestic Chinese real estate market. About 30 per cent of China’s steel output is used in residential development, which is forecast to remain flat in the next few years after a surge following the global financial crisis. It is estimated China now has a nationwide inventory of housing to last up to three years. “I am pessimistic about the iron ore price because I see the stagnant prospects of the Chinese real estate market which is going to have devastating effects for the steel industry,” Mr Liang told The Australian. “The inventory of housing is up to a couple of years, while in China the rapid development of the e-commerce market is having a big impact on the sales and rents for the commercial real estate market. I think the golden ten years that we have had in the real estate market in China is over. “The crash of the real estate market means the crash of the steel market.” Nationwide, Chinese house prices fell by 2.3 per cent during October compared with the same month last year, the largest decline in nearly three years. Prices in Beijing dropped by 1.3 per cent, the first slip since October 2012, and new home prices were down in 69 of 70 major cities measured by the National Bureau of Statistics. China revealed last week there was 108.4 million tonnes of iron ore, mostly from Australia, on hand at its ports, nearly 30 per cent more than last year. The nation’s steel mills have been gradually building up inventories over the past few months to take advantage of weaker iron ore prices, event though the industry is under major pressure. The Chinese government has ordered 30 million tonnes of production to be cut this year, on top of 10 million tonnes in 2013. In October, China produced 67.5 million tonnes of crude steel, down 0.3 per cent year on year, but analysts expect the government will order production to slow further in order to meet its 2030 carbon emissions cap. “Given the situation we are facing with real estate in China plus the oversupply caused by foreign producers’ expansion of production, I can say in 2015 the iron ore price will hardly be above $US60 a tonne,” Mr Liang said. “I’m worried that it could be even closer to $US50 a tonne. “I don’t think we will see a bull market for iron ore in the next 10 years. There might be some bounces in the price but I think they will only be small.” China Metallurgical Industry Association president Li Xingchuang last week said he expected that Chinese steel consumption would peak at 740 million tonnes a year in 2017, more than a decade earlier than most iron ore producers expected. Source >>>> bit.ly/1y5fLr0
Posted on: Sun, 30 Nov 2014 20:37:46 +0000
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