Iron ore to continue inching towards $250 by year-end - OCBC

FXStreet notes that China is shifting towards a green economy and in doing so, is encouraging more domestic steel consumption over steel exports. Analysts at OCBC Bank suggest that subdued prices in the next six months may be expected as a result of active government intervention, but iron ore may test $250/mt when Chinese buyers look to replenish depleted stockpile.

“The key changes that we continue to expect are the encouragement of a) more scrap steel imports; b) higher domestic consumption of steel vis-à-vis export market sales. In short, we expect China to import less iron ore while encouraging a higher recycling rate of steel domestically.”

“Iron ore imports may remain low in the next 6-9 months as steel mills draw down on existing inventories and sell an increasing share of its steel production to local end-users. As iron ore inventories continue to dwindle, however, we expect China to return for iron ore to replenish stockpiles and feed its domestic appetite for steel.”

“We expect iron ore prices to remain supported in the near-term, and eventually test a high of $250 before the end of the year.”