The
mining industry is deeply impacted by the covid-19 pandemic, and the situation
continues to evolve as the virus spreads throughout the globe.
In its
latest report on the coronavirus impact on the iron ore market, Fitch
Solutions has revised down most of its 2020 mining and metals
production and consumption forecasts and warns it will keep adjusting estimates
in the coming weeks.
However, Fitch analysts
maintain their iron ore price forecast for 2020 at $85/tonne, as prices remain
resilient despite the covid-19 backdrop that has resulted in the decline of
other metal prices.
After
averaging $90.4/tonne in 2019, iron ore prices have averaged $83.5/tonne in the
year to date and are currently hovering around $81.8/ tonne.
Fitch expects
prices to further recover from spot levels in H220 as steel production in China
gears up.
ANALYSTS EXPECT STRONGER STEEL PRODUCTION BY H220 TO
SUSTAIN IRON ORE DEMAND AND SUPPORT PRICES
Analysts
have made downward revisions to their iron ore production forecasts across
multiple countries.
Fitch forecasts
iron ore production to grow by 0.8% y-o-y in 2020 compared with 4.7% y-o-y in
2019, as a result of government lockdowns around the world causing operational
disruptions.
Supply
has been disrupted in H120 so far by forced mine shuts in Canada, South Africa,
Peru and India, and seasonal weather also impacted Brazil and Australia.
Chinese
domestic iron ore has been impacted by logistical issues, which has temporarily
increased China’s demand for seaborne iron ore in Q120.
On the
demand side, analysts expects stronger steel production by H220 to sustain iron
ore demand and support prices.
“In
Q120, steel production in China averaged 3.6% y-o-y, compared with 7.7% in
2019, and we expect growth to pick up pace by H220 and average 5.0% y-o-y in
2020. Europe steel demand will be weak in Q220 and could drag iron ore demand
lower as well should companies declare force majeure.”
Source: mining.com