Investec forecasts further decline in iron ore prices

By Paul Ploumis 08 Jul 2015 Last updated at 03:54:11 GMT

EDGWARE (Scrap Monster): According to Investec Bank, the recent rally in iron ore prices is overdone and the prices are likely to fall further during second half of the year. The research note released by the bank states that the recent outperformance of iron ore is unlikely to sustain as it was purely based on certain economic and supply related factors.

Investec notes that the shift in Chinese economic policy away from fixed asset investment may lead to sharp decline in industrial activity in that country. This may result in declining demand growth for iron ore, which in turn may lead to free fall in prices during the second half of the year. According to them, the prices are likely to remain at around $54.50 per dry metric ton CFR China for reference 62% Fe iron ore fines. The prices may increase marginally during 2016 to $57.50 per dry metric ton. A major recovery in prices is expected only in 2020, when prices may average at $80 per dry metric ton.

In the near term, the iron market is exposed to economic slowdown in China, weaker than expected US growth and Greek crisis situation. A clearer picture will emerge only by year-end. However, a meaningful recovery in commodity prices is not expected to happen before 2017, Investec notes.

Investec, started as a small finance company in 1974, has grown into an international specialist bank and asset manager that provides a diverse range of financial products and services to a niche client base in three principal markets, the UK and Europe, South Africa and Asia/Australia as well as certain other countries. Investec focuses on delivering distinctive profitable solutions for its clients in three core areas of activity namely, Asset Management, Wealth & Investment and Specialist Banking.