Iron ore to fall to US$120 a tonne

Prices will drop in 2014 as a decline in demand from the world's largest steel producer coincides with an increase in supply.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

While the resilience of iron ore has taken many investors and analysts by surprise in recent months, commodity analysts are saying that prices will drop in 2014 as a decline in demand from the world's largest steel producer coincides with an increase in supply from major iron ore miners.

Iron ore, a key steelmaking ingredient, is currently priced at US$139.40 per tonne, up from an average of US$132.60 per tonne in October and well above its June lows. China's imports of the commodity hit new records in July, September and November – the latest being a massive 77.8 million tonnes – indicating an upwards trend in demand.

However, according to NAB analysts the rise in prices reflected a brief period of restocking by Chinese mills for steel production. As reported by The Australian Financial Review, China's proportion of steel output in comparison to the rest of the world fell to 48.5% in October from 49.4% in September. A crackdown by Chinese authorities on its steel-making capacity would affect demand.

Whilst Australia's major iron ore miners, including BHP Billiton (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue Metals Group (ASX: FMG) – along with other heavyweights around the world including Brazil's Vale – ramp up their production levels, the additional supply coupled with decreased demand would push prices downwards.

By the end of 2014, both NAB and CIMB believe the price will have fallen to around US$120 per tonne.

Get the full report on our top dividend stock for 2014 — FREE!

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »