Fitch Ratings, a global credit rating agency, has increased its short-term price assumptions for iron ore, coking coal, thermal coal, nickel and zinc, reflecting specifically post-pandemic demand and supply disruption.
Regarding iron ore, Fitch raised its price forecast from US$110/tonne to US$120/tonne, reflecting the higher average price of US$140/tonne from the beginning of the year to date, which would then remain flat.
Although steel production in China fell due to policy requirements and lower demand, uncertain supply factors, the Ukraine-Russia war and seasonally low shipments to Brazil and Australia continued to support iron ore prices.
Apart from iron ore, Fitch raised its coking coal assumptions for 2022 and 2023, showing a disruption in supply from Australia and Russia, with year-to-date prices hitting record highs.
The rising 2022 iron ore price reflects a strong average year-to-date (ytd) price of 140 USD per tonne, which will moderate later on. Supply concerns (the Ukraine-Russia war and seasonally low shipments to Brazil and Australia) supported prices, although steel production in China fell year-on-year due to policy requirements and lower demand. While quarantines are easing, the resumption of construction activities is slow and manufacturing companies are hesitant to reopen due to fears of new infections. Although the government is determined to loosen its stimulus and monetary policy, there has been no recovery in steel demand yet. If steel consumption picks up early in the second quarter of 2022, prices may go up a bit. The low-cost iron ore supply should push the market into surplus in two to three years.
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