Global commodity markets continue to gyrate as several sectors look to have consolidated 2022's gains.
Iron ore, the key ingredient in steelmaking, looked to have staged a small recovery after prices bounced from USD$101/T on 20 July to USD$119/T by 1 August.
They have since reversed course down to USD$111/T, and the question is whether the commodity can return to its March highs.
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Can it get there?
There's mixed opinion on the potential for iron ore's recovery.
The medium-term outlook for steel demand is shrouded by several potential headwinds, particularly with respect to Chinese demand for the product.
"Steel mills have restarted some of their idled blast furnaces in recent days, encouraged by improved margins and a pickup in demand from the construction sector," Reuters reported yesterday.
Analysts at Trading Economics weren't as optimistic, however.
"Weak global demand will help turn the iron ore market to a significant surplus over the second half of 2022, which, in turn, poses a significant downside risk for prices," they said.
Meanwhile, analysts at Morgan Stanley see "little reason to be bullish on iron ore" for the remainder of FY22.
The broker says a price recovery is contingent on demand for steel out of China, itself just recovering from widespread COVID-19 lockdowns.
As a result, it says there are as yet "no signs of a meaningful recovery" for iron ore.
The downside has been seen in the basket of iron ore-producing stocks this year, despite huge rallies in other markets.
Major iron ore players Fortescue Metals Group Ltd (ASX: FMG) and Rio Tinto Ltd (ASX: RIO) have had a difficult time on the chart this year to date, down 4.5% and 5%, respectively.
