China's steel market is developing slowly. That could dent iron ore costs by approximately 30%

April 3, 2023: 2023: Experts forecast that iron ore prices could decrease nearly 28% by the end of 2023 as steel demand and output are set to decrease.

Morgan Stanley analysts state that iron ore prices will decrease and cited subdued production from the leading steel producer China and the turn toward steel scrap of the country.

“Our 2H23 base case prediction is $90 per ton,” a report commodities person Marius van Straaten and a team stated in a March 20 report.

That’s about 28% lower than the present $126 per ton for a benchmark 62% grade.

Iron ore is used to make steel, an essential material in construction and engineering projects, and dual Asian nations are on track to consume more.

Commonwealth Bank of Australia predicted a drop in iron ore prices, anticipated to be $100 per ton by the fourth quarter of this year “as China’s steel demand eases in the next half of the year,” the bank’s analys

is has stated there’s still upside potential for iron ore costs in the coming months as China reopens and eases Covid-19 restrictions. But they do not anticipate the strength of China’s steel production or demand to the previous beyond the second half of this year.

China’s pent-up steel demand will likely taper off in the second part of 2023, CBA projects. It cites China’s conservative economic and policy agenda for 2023 at its crucial policy meetings in March.

China, which accounts for 70% of the iron ore imports in the world, projected an increased target of nearly 5% for 2023.

Plans to increase iron ore purchases in China under the state-run entity China Mineral Resources Group (CMRG) could contribute to lower prices in the long haul. The CMRG is set to purchase raw materials for China’s steel industry.

“If the CMRG exerts China’s market power on iron ore producers, it should mean lower costs than otherwise more than the longer term,” CBA pointed out.

Fitch Solutions anticipates China’s domestic steel demand to slow in the future decade compared to the previous as the “rebalancing of the economy away from heavy industry and nearing the service sector resumes”, which follows the downturn of the property market.

“Stronger demand increase in India, the U.S., and Emerging Markets generally is to offset the net effect of a China deceleration,” the finance and insurance firm stated in March 23 report.