Iron ore price reverses as Rio Tinto predicted
The price of iron ore’s huge run up this week came to a halt on Thursday with the Northern China benchmark import price losing 2.2% to $58.60 per dry metric tonne (62% Fe CFR Tianjin port) according to data supplied by The Steel Index.
After nearly double digit gains over three days of trading iron ore stopped just short of $60 yesterday on the back of a brighter outlook for top consumer China. After hitting a year-high of $63.30 a month ago, the steelmaking raw material still boasts a 36.6% rise year to date and a 58% surge from near-decade lows reached mid-December as Chinese imports continue at a record breaking pace.
The rebound caught many by surprise and goes against most predictions – Goldman Sachs expects price to average $38 this year (Q1 average is $48). Producers themselves are also pessimistic – BHP’s Andrew Mackenzie last month told the industry to “prepare for lower-for-longer“. Chief executive of Vale, Murilo Ferreira is more sanguine but only expects iron ore to top $65 over the long term.
Today world number two producer Rio Tinto joined the chorus of naysayers with outgoing CEO Sam Walsh quoted by Bloomberg in London as saying the rally isn’t sustainable:
Iron ore prices “may well soften in the second half,” Walsh told reporters after the company’s annual shareholder meeting. “I’ve said all along that we expect the iron ore prices will be volatile. That’s what we’re seeing.”
“There is no doubt in my mind, that the year ahead will be a tough one for the industry and for Rio Tinto,” Walsh, due to leave the Melbourne-based giant in July, was quoted by the Sydney Morning Herald as saying:
“The market conditions are as tough as I have seen them in recent years and there’s no doubt that it will take a lot of commitment and drive to find new ways of making our business even better and stronger.”