Vladimír Urbánek (Kurzy.cz)
Commodities  |  October 03, 2012 11:42:19

Commodity flop? Iron ore is off to a bearish trend longest in 20 years


Iron ore is currently one of the biggest commodity losers and it seems that this primacy to hold for some time. In times of high development of the Chinese economy in 2001-2008, the price of iron ore over zešestinásobila and last year in February, peaked at $ 191.9 per metric ton. China's economy began to cool, and with it also began to decline price of iron ore. According to estimates by Citigroup China for iron ore or steel, on average, spend about 8% of its GDP, which is equivalent to 16 times more than the U.S. and many times more than the global average computed at 1.6% of global GDP.
Price dropped to an average of $ 167.6 last year. It is expected that the prices will be at least until 2017 to continue to decline to the level of 96 USD per metric ton. If this is confirmed, it will be the longest bearish trend for this commodity from the years 1992-4.Some estimates are even more pessimistic and allow prices to drop 75 or 50 USD for two years.

Ore prices with immediate delivery in the Chinese port of Tianjin reached the level of $ 86.7, the lowest since October 2009, during the last year prices declined by 40%.

An important problem in the case of iron ore is the fact that the previous boom period in the large mining companies used for large-scale investment in new mining capacity. Now when I drop in demand in the market high surplus production, which in turn pushes the price decline. A number of new mining projects also awaiting its opening.

Estimates for the Chinese steel production fell sharply. Last year, the growth in the most populous country in the world growth to 8.9%. For the next 5 years is estimated to average annual growth at the level of 3-5%.
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