Iron ore prices climbed 20 percent to an eight-month high on expectations that Chinese steel mills are planning a short-term output boost. Iron ore has risen more than 22 percent this year, making it the best performing commodity so far in 2016, in a rally fuelled by stronger Chinese steel prices as market participants looked to brisk seasonal demand from March.
The rally followed losses of around 70 percent in the past three years as iron ore was hit by a global glut and weaker Chinese steel demand.
However, Goldman Sachs said rally in iron ore prices will not last in the absence of a significant improvement in steel demand from top consumer China, as the investment bank stuck to its bearish take on one of this year’s biggest commodity comebacks.
Goldman has kept its iron ore price forecast for 2016 at USD 38 a tonne and USD 35 for the next two years. Apart from the surge in steel prices, Goldman said disruptions in top exporters Australia and Brazil impacted iron ore supply in January, also stoking the price rally.
(With inputs from Reuters)