Iron ore prices soar on scarcity

By: Maximilian Court, Senior Research Analyst of S&P Global Market Intelligence | July 24, 2019

According to S&P Global Market Intelligence Iron Ore Commodity Briefing Service (July issue), prices for 62% Fe iron ores have remained at approximately US$90/t to US$100/t since the beginning of April and have been above US$100/t in their latest run since June 10. We have increased our price expectations on increased supply disruptions, though we hold our estimates for steel demand broadly constant given policy uncertainty and a long-held assumption of capacity curbs for the December half of 2019. We expect a greater seaborne iron ore deficit of 54 million tonnes, which is increased from 36 Mt due to larger-than-expected disruption at Rio Tinto's Pilbara mines in Australia and a slower resumption of idled Chinese concentrate capacity.

Key takeaways:

  • Iron ore prices increased 6.7% to US$121.90/t on July 19 from US$114.30/t on June 19. Prices peaked at US$126.40/t on July 3 but declined on reticent buying activity.
  • Global iron ore production is expected to grow by 1.2% year over year in 2019, to 2.2 billion tonnes
  • We expect prices for 62% Fe iron ore to increase to average US$95.50/t in 2020 but to decline to an average of US$86/t in 2021, as the seaborne iron ore market deficit decreases.

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