Citi: iron ore price may fall sharply in 2020

Recently, Tracy Liao, research analyst at Citi, said that in 2020, global iron ore prices are expected to fall sharply, metallurgical coal prices are expected to rise, while steel prices are basically stable but will not fall sharply. According to Tracy, in 2020, 62% of the iron ore powder CIF price in China will fall to 80 US dollars / ton from 94 US dollars / ton in 2019, and continue to decline to 60 US dollars / ton in 2021 and 2022. This price level is not far from the average price of $69 / ton in 2018. In the first half of 2019, the interruption of iron ore supply caused a sharp rise in global iron ore prices. In 2019, Vale's iron ore production in Brazil was cut off. In addition, the impact of Australia's tropical cyclone on subway ore production led to a sharp drop in global iron ore supply and a sharp rise in prices, she said. At present, the iron ore industry has basically returned to stability. Vale said the dam break in Brazil's mining area in January led to a sudden reduction in iron ore production capacity of 90 million tons / year, which has now been restored to 30-40 million tons / year. However, the iron ore production affected by the tropical cyclone has not yet fully recovered. The overall trend of iron ore is still declining, but there are still many uncertain factors in the future Tracy said. He pointed out that due to the sufficient supply of raw materials and the low profit of steelmaking, the price difference between iron ore block and pellet is under pressure, and the price difference between 65%, 62% and 58% grade refined iron ore powder is far lower than the level in 2017-2018. It is predicted by Citibank that in 2020, the price of 65% grade refined iron ore powder will drop from 107 US dollars / ton in 2019 to 91 US dollars / ton, and to 67 US dollars / ton and 65 US dollars / ton in 2021 and 2022, respectively, which is far lower than 90 US dollars / ton in 2018.

According to Tracy, since this year, due to the weak demand of China and India, the price of metallurgical coal has declined. However, a small rebound in demand in recent days may lead to the recovery of coal price from the current level. "China's strong import demand may lead to the purchase of Australian coking coal spot." She said, noting that there is a large difference between the FOB price of coking coal in Australia and the price of coal in China. She predicts that by 2021, the supply of seaborne coking coal will have limited growth, while the increase in domestic steel plants may support the demand for hard coking coal. According to Citibank, the average price of seaborne hard coking coal is expected to be 185 US dollars / ton in 2019, 170 US dollars / ton in 2020, 160 US dollars / ton in 2021 and 150 US dollars / ton in 2022. According to Tracy, the rapid economic growth momentum in 2019 may moderate in 2020, which will drive the steel industry to maintain stability. In 2019, India's economic development is very sluggish, and it is expected to focus on infrastructure development after reaching the bottom in 2020. According to Tracy, China accounts for 50% of global steel consumption, with strong growth in steel consumption in 2019, with real estate growth exceeding expectations. However, China's real estate growth will moderate in 2020, while fixed asset investment is still weak. According to Tracy, the fundamentals of the steel market other than China are still weak and market demand is flat, as evidenced by the sharp decline in the comprehensive profit margin of ArcelorMittal, a steel company. According to her, the automobile industry is usually the second largest steel consumption industry. In 2019, the global automobile industry was weak, China's domestic automobile sales fell, and India's automobile industry was also weak. It is expected that the automotive industry will be the biggest challenge in the next two years Tracy said.