Iron Ore (IO) has run from $86 per ton to $122 per ton with expectations that prices will hold at this elevated level. According senior resource analyst at Mine Life Pty in Sydney, Gavin Wendt told Bloomberg Network “Prices will stay about where they are now until 2013,”
Banco Fator says the steel industry in Brazil and worldwide will have a slow recovery in 2012, affected by the crisis in Europe and deceleration of China’s economy. For this reason, they do not recommend the sector in the short and medium term.
New data from the World Steel Association show that global crude steel production is up 6% year-on-year, but on a month-on-month basis is still flat at best. Global steel production is now 5% lower than the peak production in May 2011 of 130 million tons.
Iron prices have been on a two-week rally — their longest uninterrupted climb in history — as Chinese steel mills come back as extremely eager buyers. Some are nervous, but the chart does not lie.
While the bears have pounced on headline numbers from the Chinese steel industry to talk down Asia and the rest of the global economy, investors investors need to drill down beneath the headlines to find the real story.