Govt bearish on iron ore

DESPITE current strong iron ore prices, the Australian government has forecast a steep fall in the first half of 2020.
Govt bearish on iron ore Govt bearish on iron ore Govt bearish on iron ore Govt bearish on iron ore Govt bearish on iron ore

Staff reporter

The federal government today released its Mid-Year Economic and Fiscal Outlook (MYEFO), which confirmed the budget was on track to return to surplus next year for the first time in 12 years.

The economy is forecast to grow by 2.25% in 2019-20, and 2.75% in 2020-21.

The government expects the iron ore price to drop to US$55 per tonne by the end of the June quarter, well below its current level of more than $90/t.

Westpac was a little more bullish in an updated published on Friday.

"Bottom line, while iron ore supply has partly normalised, will continue doing so, and slower demand will weigh on prices in 2020, there are a number of demand side observations suggesting it is too early to turn bearish on iron ore prices," analysts Justin Smirk and Robert Rennie said.

"Hence our forecast of iron ore to hold around current levels through to mid-2020 when that lift in supply, and slower demand, will push prices back down to US$65/t by year-end."

The government is assuming flat metallurgical coal prices of $134/t and for the thermal coal price to remain at $64/t.

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