Higher inventories than in the previous two years will moderate iron ore prices in 2022, but cost inflation – including shipping rates and environmental compliance – will limit downside risks in the coming years, says Fitch Ratings.
The credit rating agency has cut its 2022 iron ore price assumption to $90/tonne from $100/t cfr China for 62% Fe fines. “We expect the iron ore market to be more balanced in 2022 following a large deficit in 2021,” it says in a note sent to Kallanish.
For hard coking coal, the agency has revised up its price assumption for 2022 to $160/t from $135/t fob Australia. Prices will moderate from current levels due to lower demand from China, driven by the government-induced decline in steel production and winter season curbs. “However, supply is likely to remain disrupted, while there are some pockets of growing demand, including India, which support our higher-than-previously expected short-term assumption,” Fitch observes.
Nickel is meanwhile seen at $16,000/t LME spot in 2022 versus the previous $15,000/t amid residual effects of low stocks and higher prices in 2021. But in the longer term there is the risk of increased supply from Indonesia, which could potentially lead to small market surpluses.
Adam Smith Germany
