Westpac has warned that iron ore prices could collapse 30 per cent this year to about $US70 a tonne when Rio Tinto floods the market with fresh supply, deflating hopes of a sustained rebound for Australia’s key export.
The spot price of iron ore rallied nearly 7 per cent last week to $US104.15 a tonne after robust Chinese trade data bolstered hopes that Beijing’s stimulus measures were lifting steel demand.
The closure of Port Hedland temporarily disrupted iron ore supply.
The data – which showed annual imports of the steel-making ingredient at a record – coincided with supply disruptions at Australia’s largest iron ore export hub Port Hedland, which closed over the weekend due to a tropical cyclone developing offshore of the Pilbara region of Western Australia.
The port reopened on Monday after the national weather bureau advised that a severe tropical cyclone was moving away from the Pilbara.
Westpac predicted that iron ore would continue to push higher above the key $US100 a tonne level over the coming weeks, boosted by stronger steel production into the end of last year and signs of restocking ahead of the Lunar New Year holiday on January 29.
