The Future of Iron Ore

The future of Iron ore rose recently with an expected increase in construction activity in China in September and October.

Future of iron ore

This happens to be the peak season for the industry in the country. The prices of the September contract climbed 0.2% to 98.60 USD. The October contract also increased 1.5% to a session high of 97.05 USD per tonne. The city of Zhengzhou in China announced that it would start building housing projects – a welcome development which affected the prices of iron ore and expect a raise in the future of iron ore.

The city has promised to build these housing projects within a span of 30 days. They will be asking developers to return misappropriated funds, encourage real estate firms to file for bankruptcy, and use special loans.

Homebuyers from at least 80 cities on the Mainland have threatened to pull out from housing projects because of liquidity problems and COVID-19 restrictions. However, even if COVID-19 restrictions are currently being intensified in the country, steel futures advanced concurrently with iron ore.

“The market is cautiously looking forward to September and October demand,” Zhongzhou Futures analysts said. According to Fastmarkets MB, benchmark 62% Fe fines imported into Northern China were changing hands for $100.62 a ton on the morning of September 29 – up by 4.4%.

China’s iron ore imports increased last August by 5.5% according to customs data. The country also brought in 96.21 million tonnes of raw material as compared to July’s 91.24 million tonnes. It also adds hope for the future of iron ore.

“Data from CISA showed the average daily output of crude steel from major steel mills increased 2.23% in mid-September versus early September as the industry geared up for peak construction,” Westpac analysts said in a note referring to the industry group China Iron & Steel Association.

Stronger Outlook on the future of Iron Ore

The future of Iron ore forecasts is expected to remain above 100 USD per ton in 2023 with an anticipated increase in demand from China. The Chinese Government has renewed stimulus for infrastructure in light of slower economic growth and increased demand for iron ore in the steelmaking process.

“While we expect iron ore prices to see some weakness in the coming days from spot levels over the Chinese crackdown, we believe this will only be temporary. In fact, we believe that prices will receive support from supply constraints and renewed Chinese demand strength in 2022, such that the annual average iron ore price for 2022 and 2023 will remain above pre-COVID-19 levels,” Fitch Solutions stated.

According to the Iron Ore Global Market Report for 2022 by The Business Research Company, the iron ore market is expected to grow to 261.71 billion USD in 2026 at a compound annual growth rate (CAGR) of 8.5%. This growth is linked to the ever-increasing number of projects in rapidly developing countries like China and India. These countries have a rising population and high demand for infrastructure development.

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What to expect by 2023

Goldman Sachs’ predictions state that iron ore prices are expected to soften in 2023. Analysts said that the average price of iron ore would be 120 USD per ton in 2022. Goldman’s forecast includes 80 USD per ton in 2024, 75 USD per ton in 2025, and 81 USD per ton in 2026.

“We expect the market to swing back into a small surplus in 2023. As such, we see limited upside in iron ore prices. We have lowered our end-of-year target to $115/t and expect prices to trend lower in Q4 and into 2023 as the impact of the stimulus measures iron ore demand weakens. We ultimately see prices at the end of 2023 sitting under $100/t as the market tightness eases,” Economists at ANZ Bank opined.

Ghana is expected to launch its own iron ore mining project by the end of 2023 with Ghana Integrated Iron and Steel Development Corporation or GIISDEC. According to the Yendi legislator, the investment could not get support from the government because of the fact that the costs for funding mining projects are extremely high. These developments also increase the expectation about the future of iron ore.

It is perhaps for this reason that private corporations are funding this project. Around ten companies are looking at tapping into the country’s iron deposits. Ghana also remains hopeful about big steel companies investing in the country even if there are risks in this project.

More news about iron ore…

Currently, there are 500 mineral explorations mainly targeting gold, lithium, copper, and cobalt. The Minister of Lands and Natural Resources, Samuel Abdulai Jinapor said that exploration projects were expected to increase in the coming years following recent geological investigations which revealed viable prospects for iron re, nickel, zinc, chromium, lead, and columbite-tantalite,

The government is currently focusing on translating the volume of mineral production into wealth that will benefit Ghanaians and stakeholders equitably. The Africa Down Under or ADU Conference, in which Mr Jinapor was a speaker, the conference aims to provide a platform for engagement regarding the mining industry and strengthening the Australian-African relationship in the mining industry.

“Our policy for the development of these minerals is to pursue a path that fosters optimal socio-economic development, through effectively and efficiently exploiting and managing Ghana’s green minerals, and contributing positively to dealing with the climate change phenomena, working towards the net zero emission target, and collaborating with other relevant stakeholders in employing climate-friendly technologies and practices, to achieve the maximum developmental impact for the country. We are, therefore, committed to working with all stakeholders to retain the full value chain of these ‘minerals of the future’ in our country by adding value to the minerals mined,” the Minister noted.

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