Gerard Burg, Senior Economist at NAB, explains that metallurgical coal prices have spiked following supply disruptions in Queensland following Tropical Cyclone Debbie and expects that rail infrastructure will gradually return to normal after 26 April – bringing spot prices back to levels around US$150 a tonne.
“Spot prices for iron ore have exhibited considerable volatility in recent months – having risen strongly between October 2016 and February 2017 (rising from around US$55 a tonne to around US$96 a tonne for benchmark 62% ore) before retreating sharply. At the time of writing, spot prices were around US$65 a tonne – around a third lower in the space of two months.”
“We argue that two different factors contributed to these trends. The initial rising trend in spot prices was driven by the shift in Chinese consumer preference for higher grade ore. In contrast, we suggest that speculative pressure has driven the sharp retreat.”
“Market fundamentals don’t appear supportive of a rebound in spot prices, given strong iron ore supply that has driven Chinese stockpiles to record levels, while demand is expected to soften, as Chinese construction activity begins to wane.”
“The rapid decline in spot iron ore prices – and limited upside potential on ample supplies and a weak demand outlook – means that we have revised our forecasts lower, with a flatter profile trending around US$60 a tonne across the second half of 2017 and 2018.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.