Iron ore prices could decline further in 2021 and 2022 following market changes and the recovery of Brazilian production, noted UK’s market analysis company Capital Economics today.
Although prices rose as much as 40pc from December 2020 to May this year, the report forecasts a sustained decline throughout 2021, which could bring levels to around $140/mt by the end of the year.
If the trend continues, Capital Economics has projected a further drop to $120/mt towards the end of 2022. This fall will continue as the market shifts into a surplus.
The company explained that Brazilian iron ore exports are already very close to levels prior to the collapse of the Brumadinho dam on the supply side and China’s domestic production increased in April and March both factors are fuelling the decline.
Regarding the Chinese government’s regulations against speculation, Capital Economics admitted that the construction sector may get affected and policies may weigh over demand. However, the impact will be minimal in the long term and the possible decrease in prices will be caused by other market factors.