Iron ore price to drop by a quarter in the next year, CBA warns

The price of iron ore has halved since a peak in May and will decline by a further 27 per cent to $US85 per tonne by the fourth quarter of next year as China limits steel-making to cut its carbon emissions, CBA has warned.

“These steel output cuts, driven by emission reduction goals, aim to cap China’s steel output in 2021 at 2020 levels,” said Vivek Dhar, mining and energy commodities analyst for CBA.

The Chinese government policy objects require crude steel output to drop about 12 per cent from September to December and comes after a 13.2 per cent decline in August alone, CBA says.

“China’s steel output is crucial to iron ore prices because China accounts for 70 per cent ‑ 75 per cent of the world’s iron ore imports,” Dhar said in a research note on Thursday.

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