Iron ore price hits three-week low

The import price of 62% Fe content ore at the port of Tianjin dropped 2.8% to $77.10 per dry metric tonne on Wednesday, the lowest since the end of November according to data supplied by The Steel Index.

Year to date the price of the steelmaking raw material is still up nearly 80% following near-decade lows in December last year, but the outlook going into 2017 is decidedly murkier.

Iron ore price hits three-week low

Source: The Steel Index

FocusEconomics in its December survey of analysts and institutions shows the price of iron ore averaging $60.30 a tonne during the first quarter of next year. For Q4 2017, analysts expect prices to fall further to average $55.70 over the three month period.

Dutch bank ABN Amro is the most optimistic calling for a $77 average next year while BMO Capital Markets see prices falling sharply from today's levels to average $46 over the course of 2017. Most analysts see iron ore between $50–$60 next year which is on par with the commodity's year to date average.

Goldman Sachs predicting above $60 in early 2017, with a moderate decline to $55 a tonne by the end of next year. That's the same price Australia's Industry department is predicting for free-on-board prices by September next year (add around $6 for freight costs).

Iron ore price expectations on derivatives markets are much more optimistic reaching year-to-date highs last week according to a recent note from the Singapore Exchange:

With iron ore spot prices surging in recent weeks, optimism has extended to forward price expectations too. 2017 forward price expectations have risen to their highest level of the year, with the SGX Iron Ore forward curve currently pricing 2017 at around $70 per tonne (~25% higher than 2016’s YTD average of $56/t).