Spot Iron ore will find a floor at $120/MT as Chinese steel
makers replenish their stockpiles, said IG Markets institutional dealer Chris
Weston said yesterday.
The steel-making ingredient tumbled by 31% in October, the
biggest loss since at least 2008, before rallying by 25% to $147,60 on November
17.
Prices would not decline below $120/MT next year “even
in a stress scenario” because lower levels will put some Chinese and
international suppliers out of business, Vale, the world's largest producer,
said this week.
The bottom for prices seen by Vale is “about
right”, said Mr Weston, who specialises in analysing mining giants BHP
Billiton and Rio Tinto Group. “Chinese steel mills will probably
restock in the lead-up to winter and use any more dips” to do that, he
said.
China usually begins restocking of bulk commodities in
November before ramping up production in the New Year, UBS said in a November
22 report.
“You're clearly seeing the steel industry running at
operating rates that are lower than its historical highs,” said , Marius
Kloppers , CEO of BHP.
“When we talk to our Chinese customers, there is not a
sentiment that operating rates of the steel industry will improve or change
dramatically over the next little while,” he added.
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