S&P lowers 2015/16 iron ore forecast to $65 per tonne cfr

Credit rating agency Standard & Poor’s slashed its price forecast for iron ore for 2015 and 2016, its third downward adjustment in the past twelve months.

Paragraph entered by Atlantic migration, in order for SteelFirst articles to display correctly on Metal Bulletin.

The agency now expects iron ore prices to average $65 per tonne cfr for 2015 and 2016, compared with its previous forecast of $85 per tonne cfr, it said on Tuesday January 21.

This is even lower than current market levels.

Metal Bulletin’s 62% Fe Iron Ore Index was at $68.16 per tonne cfr Qingdao on Tuesday.

“We are significantly lowering our price assumptions for key commodities, notably iron ore […] We believe this could result in some negative rating actions and outlook changes over the next week or two, as we review our portfolio of credits,” the agency said.

S&P said its forecast cut reflects not just the effects of weaker supply-demand balances, but also lower production costs, including substantial changes in foreign exchange rates.

“At our assumed price of $65 per metric ton, we expect weak credit measures to persist until 2017 in the absence of sharp production curtailments,” it said.

The agency estimates that there will be about 100 million tonnes of seaborne supply coming into the market in 2015.

“This, together with softer demand growth from China, will limit any meaningful and sustainable recovery in iron ore prices in the next two years. Market equilibrium might only improve if the market finally absorbs this new supply. We believe that this will likely occur in 2017, driving prices up that year.”

S&P also cut its price forecast for copper in 2015 and 2016, from $3.10 per pound to $2.70 per pound.

It expects China’s GDP growth rate to drop to 6.7% by 2016, from 7.4% in 2014.

What to read next
Any bolstering effect on US ferrous scrap exports from the up-month in February’s domestic trade will be tempered in the immediate aftermath of two earthquakes in Turkey — the country’s largest importing region — on Monday, February 6
Steel trading and production have come to a halt in the eastern Turkish region of Iskenderun following a devastating earthquake that hit the region on Monday February 6 and put mills in the area under force majeure, sources told Fastmarkets on Tuesday
A 120-day closure of four Illinois dams scheduled for 2023 will disrupt barge shipments and have potentially both negative and positive impacts on scrap and finished steel products from Canada to Texas
Market participants are cautiously optimistic about a rebound in iron ore concentrate premiums, with steelmakers around the world set to ramp-up production in line with an anticipated increase in demand for steel products, Fastmarkets understands
General Motors (GM) is investing $650 million to develop the Thacker Pass mine in Nevada, the largest known source of lithium in the US and the third largest in the world
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.