The Motley Fool

Iron ore to fall to US$120 a tonne

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!

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of June 30th

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

Related Articles...

Latest posts by Ryan Newman (see all)