Iron ore price could be in for drastic fall: WoodMac

THE drop in the iron ore price seen over the past few days “is the start of a trend, not a blip”, and if combined with an ongoing slump in demand could see prices tumble as low as US$50 per tonne later in the year, consultancy Wood Mackenzie said Tuesday.
Iron ore price could be in for drastic fall: WoodMac Iron ore price could be in for drastic fall: WoodMac Iron ore price could be in for drastic fall: WoodMac Iron ore price could be in for drastic fall: WoodMac Iron ore price could be in for drastic fall: WoodMac

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Iron ore prices slumped to levels not seen since early February on Monday, with benchmark 62% Fe fines closing at $80.20/t.

"We are not yet looking at a glut of seaborne iron ore. But risks are escalating, and the balance is tilting towards a bigger hit to iron ore demand than supply," said Wood Mackenzie research director Paul Gray.

Gray said his firm's analysis showed prices should gravitate towards $70/t over the course of the year, but there were reasons prices could fall further.

"If demand turns out to be weaker than forecast and the iron ore market moves into acute oversupply, prices could fall as low as $50/tonne and we view this as the lower bound for prices," said Gray.

"Once prices fall to this level, they begin to approach the break-even of the major iron ore producers and a supply response becomes inevitable.

However, for the time being, average prices for the March quarter sit above the firm's pre-crisis forecast of $85/t.

"If the price holds at $80/tonne for the remaining six trading days of March, the average price for Q1-20 would be $88.50/t," said Gray.

He said the price had been supported by resilient Chinese hot metal production coinciding with supply side constraints in Brazil and Australia.