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Iron ore prices may have hit their lows for 2015: Investec

Iron ore price falls earlier this year may mark the lows for 2015 as supportive factors aid the market going forward until 2016, Investec bank said Monday.

“Iron ore [prices] have proved remarkably resilient in recent months, despite a wall of supply that is coming on stream,” Investec said in a sector report led by analyst Hunter Hillcoat.

“Movements in freight costs, energy prices and exchange rates lead us to believe we may have seen the worst in iron ore headline prices.” At the same time, Investec said the mining sector was unlikely to recover anytime soon, especially as market signals from China appear to be deteriorating, on its outlook for metals and mining commodity prices.

“The super cycle, driven by a structural shift in the demand curve resulting from China’s industrialization and a protracted lag in the supply response, is now well and truly over,” it said.
Investec now expects iron ore 62% Fe CFR China to average at $56.30/dry mt in 2015 and $52/dmt in 2016.

Iron ore lump 62% Fe may average at $67.90/dmt, giving a premium of $0.187/dmt unit in 2015, and at $61.90/dmt in 2016, with a premium of $0.16/dmtu.

The bank expects coking coal to average $99/mt FOB in 2015, falling to $87/mt FOB in 2016 and recovering to a long-term $130/mt FOB in 2020.

Investec said precious metals, and non-ferrous metals with the exception of lead and zinc, may see a price bottom before the second half of 2016 at the earliest.

The steel raw materials outlook was worse.

“In the steel making raw materials of iron ore, metallurgical coal, and manganese, the picture is worse with a trough in downside price pressure occurring only at the end of 2016 under our new forecast profile.”
Source: Platts