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Iron Ore prices hit a seven year high in December and while the surge should fade post the Lunar New Year, economists at Westpac have upgraded their forecast profile on improving underlying support. 

Key quotes

“Our March 2021 has been lifted to $130/t from $105/t. For end 2021 there is a more modest lift to $112/t vs $90/t before and end 2022 is now $100/t vs $85/t.”

“In the year to October, Chinese steel production is up 13% and is on track to lift at least 6% for all of 2020, a strong result following the 8% gain in 2019. In addition steel production from the rest of the world has recovered from the COVID-19 shock to be on par with a year ago. Despite the disruptions to supply from Brazil and Australia, Chinese imports are up around 8% in the year to November and looking for a total gain of 12% this year, a significant lift from the flat print in 2019.”

“With steel prices remaining firm and steel inventories (at both traders and steel mills) rising only modestly, it appears that demand for steel will remain supportive of iron ore prices at least into the first half of 2021.”