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The iron ore equation: Do structural supply gaps and China policy stimulus = US$200/t?

11 May 2021


Iron ore has already confounded most analysts’ expectations by trading above $US200/tonne. The next question for investors is — can it stay there?

To analyse the broader market, Stockhead caught up this week with Magnetite Mines (ASX:MGT) director Mark Eames, who provided some historical context on the supply/demand dynamics fuelling current prices.

Iron ore — the supply side

Recent headlines for iron ore prices have largely centred around the demand side — largely China’s appetite for steel inputs as part of its post-COVID infrastructure push (more on that later).

But to explain current prices, markets are also assessing that demand-side strength in the context of ongoing supply constraints.

On that front, Eames said it’s useful to look backwards at the last China-led mining boom, which ran from around 2005 to 2015.

“Those were fairly buoyant years for iron ore. Prices ranged between about US$120 and US$160 for most of that time, and stayed there for a whole decade,” he said.

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