China Steel Group Executive Expects Decline in Iron Ore Price

(Bloomberg) -- The recent speculation-driven surge in the value of iron ore is unsustainable and the trend will be reversed when the market settles, a senior executive at China’s top industry body said.

“Iron ore prices will be in a downward trend as the market digests and materializes price speculation,” Luo Tiejun, a vice chairman of China Iron and Steel Association, said at Mysteel Global’s annual conference in Shanghai on Saturday, according to a transcript of his address. He made the comments when outlining the outlook for next year.

Elevated prices of iron ore and coking coal will drive the price of steel and “greatly” limit mills’ profits, Luo said.

The value of iron ore has soared over the past month, with benchmark spot prices climbing to a nine-year high of more than $160 a metric ton, as a resurgence in China’s economy coincides with constrained supply. Elevated prices have already prompted the association to call for government intervention. The Dalian exchange has toughened trading terms in an effort to rein in speculators.

Luo reiterated the group’s calls for setting up a new pricing mechanism for iron ore and improving the supervision of futures markets.

His view echoed a forecast by Mysteel on Friday that iron ore prices would peak during the first quarter next year before declining as overseas supply into China ramps up. The researcher estimated that the spot price may average $110 to $120 a metric ton in 2021, compared with $109 to $110 this year.

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With assistance from Bloomberg