Citi forecasts iron ore prices to hit $85 per tonne in three months

From Investing.com: 2024-08-25 05:02:02

Analysts at Citi Research discussed the challenges facing the iron ore market, prompting investors to consider whether it’s time to take action or wait for developments. The price of iron ore is close to crucial cost support levels, with predictions of hitting $85 per tonne in the next three months.

Positive surprises in iron ore demand include decreased use of scrap in steel production, leading to higher demand for iron ore. Despite record-high port inventories, steel mills have low iron ore inventories, indicating strong demand. However, stimulus from China has not materialized, affecting steel demand.

Key indicators for a positive turnaround in the iron ore market include a shift in Total Social Financing (TSF) growth trends and signs of a bottoming in property data. Steel production decline in China and potential supply disruptions could impact iron ore prices stabilizing at $85 per tonne.

Iron ore prices are nearing the top end of the cost curve for traditional suppliers, with $90 per tonne as a soft support level and $80 per tonne as a hard support level. Current inventory levels at steel mills are low, indicating potential for increased production and future demand rebound.

Chinese port inventories of iron ore are high, but inventories at steel mills are low, showing readiness to increase production. Steel inventories at distributors and mills are at five-year lows, suggesting caution in the market but potential for a future uptick in iron ore demand.



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