Budget 2024: Iron ore price plunge baked into budget ‘unlikely’ to materialise

Already a subscriber?A deteriorating outlook for Chinese demand has left the federal budget forecasting iron ore prices to fall considerably in the next 12 months, but analysts say the predictions are too dire.China has increasingly been shipping its steel overseas as demand from the property sector continues to falter.

“Such a sharp capitulation in spot iron ore … looks unlikely given our expectations over the next year,” he said. “Supply growth across these commodities won’t be material and iron ore and coal import demand are unlikely to plunge.”“Our house view assumes iron ore prices will remain $US90 to $US110 per metric tonne, well above the budget assumption of $US60 per metric ton, implying upside to the official projections,” S&P analyst Martin Foo said on Monday.

She said a more “global lens” for iron ore was needed now that China’s property demand was faltering.“Chinese steel production has been trending sideways for much of the last three years, yet iron ore has continued to trade around $US120 per tonne – well above where consensus estimated it would be,” she said in a note this week.

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