Innovators: iron ore is set for a good finish until 2023 | spcilvly

  • Fitch’s BMI predicts iron ore will average $110/t in 2023 and $100/t in 2024, as the market remains strong despite increased supply.
  • China’s infrastructure, automotive and manufacturing sectors are driving strong demand for steel as its property market falters.
  • Lithium Stocks Continue to Get Backs from Investors After Tough Month

It has long been a market for investors in battery metals in 2023.

But the heat has been seeping into lithium prices, dragging down stocks focused on energy transition metals with it.

Pilbara Minerals (ASX:PLS), for example, is now worth around $11.5 billion, having lost 17% of its value in the last month.

The traveling companions are not much better. Allkem (ASX:AKE) is down 23% in the last 30 days, while IGO (ASX:IGO), which has also been exposed to falling nickel and copper prices, is down more than 25%. .

A 16% drop over the past month Mineral Resources (ASX:MIN) completes a difficult journey for the sector’s biggest players.

Bearish analyst reports haven’t helped.

READ: JPMorgan says lithium will crash >40%, but UBS thinks these quality ASX shares can weather the storm

In contrast, depleted and depreciated iron ore has lately fled for the hills.

Prices in Singapore for the 62% Fe material, the benchmark quality aligned with fines shipped from the Pilbara by Rio Tinto (ASX:RIO) and BHP (ASX:BHP), recently topped $120/t and are currently trading above 114 USD/t. .

BHP and Rio continue to fall over the past month, but not as sharply as their lithium-producing peers, while iron ore miner Fortescue (ASX:FMG) is up almost 3%.

Can iron ore continue to beat the odds?

There remains skepticism in some quarters that iron ore can remain so strong.

China’s property market continues to resemble a burst balloon, with little gas left in the tank to re-inflate it quickly enough before new holes are made in its membrane.

But Fitch analysts say the market is set to remain strong through the end of 2023, with prices averaging $110/t this year and remaining above $100/t in 2024 before beginning what they see as a long drop to 50 USD/t. by 2032.

“Prices have remained resilient thanks to strong imports from mainland China in 2023 so far, as a result of declining domestic physical inventories at ports,” they say.

“From January to August 2023, mainland China’s iron ore imports rose 7.4% year-on-year to an all-time high of 775.7 million tonnes. Total iron ore inventory in mainland Chinese ports as of September 15, 2023 is 11.4 kt, compared to 13.4 kt on January 6, 2023.

“Despite mainland China’s uneven economic growth and a still failing real estate sector, blast furnace steel production and therefore iron ore demand have defied the odds, through support from non-real estate sectors.” , including shipping, machinery, automobiles and infrastructure.

“From January to August 2023, China produced 712.93 million tons of crude steel, 2.6% more than in the same period of 2022. We expect further increases in iron ore prices in the fourth quarter of 2023 ahead of the winter holidays as steel mills continue to replenish.

Positive sentiment in futures also keeps iron ore strong in Singapore and China’s Dalian Exchange. Fitch is hopeful that Chinese stimulus can revive the real estate sector.

“Although the mainland Chinese real estate sector remains in contraction, the positive sentiment stems from hopes of a turnaround, with some form of stimulus from the mainland Chinese government,” the analysts say.

“Total credit growth in China increased 9% year-on-year in August 2023, up from 8.9% in July 2023, marking the first month-on-month acceleration since March 2023.

“Commercial bank loans increased by 11.1% in August compared to the same period last year. In fact, bank loans increased in August to CNY 1.36 trillion, almost quadrupling the CNY 345.9 billion in July 2023. This indicates that China’s beleaguered real estate sector may be starting to recover.”

And in the markets

The materials sector today reflected those recent themes, with iron ore stocks rising, leading the sector to a morning gain of 0.71%.

The big lithium players are in the red, while coal reserves are also struggling.

Mid-cap companies Core Lithium (ASX:CXO) and Azure Minerals (ASX:AZS) were among the hardest hit, both falling more than 5%, while gold stocks rebounded after a weak jobs report in US which saw multi-year Treasury yields fall. highs, said ANZ’s Mahjabeen Zaman.

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