Iron ore FY performance review

The iron ore market has been experiencing significant fluctuations in prices and demand, with uncertainty looming over the outlook. While iron ore prices did recover in July from a five-month low witnessed in May, the market remains shaky due to various factors influencing price movements. Erik Hedborg, Principal Analyst for Steel at CRU, provided insights on the major influences driving these fluctuations in a recent interview with CNBC Africa. One of the primary factors impacting the market is the performance of China's steel industry, which accounts for over 70% of global iron ore imports. China, facing economic struggles, particularly in the real estate market, has seen steel margins decline, affecting steel demand and subsequently iron ore demand. Despite this, steel production remains resilient in China, with an increase in exports helping to sustain iron ore demand. Currently, iron ore prices are holding at around $115 per tonne, providing profitability for producers but still facing challenges. Stimulus measures in China have injected some optimism into the market, but the fundamental demand for steel and iron ore has not seen significant improvements. Erik also highlighted the impact of infrastructure challenges in South Africa on iron ore exports, leading to a decline in exports. Despite being the fourth-largest iron ore supplier globally, South Africa's issues have prevented it from capitalizing fully on the current demand. Looking ahead, Erik expects iron ore prices to trend downwards but anticipates a restocking period towards the end of the year and early 2024. This restocking coincides with the Chinese New Year and could provide a temporary boost to prices. However, in the long term, a balanced market is anticipated with prices stabilizing below $100 per tonne. Additionally, Europe's shift towards hydrogen-based steel production may increase the demand for high-quality iron ore like pellets in the region. While the near-term market in Europe remains stable, better macroeconomic conditions are expected to drive increased steel demand. Future risks in the iron ore market include supply chain disruptions, which have been seen in various regions globally, as well as potential shifts in demand trends, especially in China. Keeping a close eye on both supply and demand factors will be crucial in navigating the uncertainties in the iron ore market.