Iron ore & oil prices set to dip in 2012
Iron ore prices are set to dip next year after unprecedented stockpiling of the steel-making commodity by China, Westpac chief economist Bill Evans says.
He also stated the oil price could fall because of weaker global growth.
Mr Evans stated the iron ore price was higher than he would have expected, given that the brakes were being put on China’s investment property boom after a “dangerous” surge in residential construction to levels nearly double that of underlying demand.
“The area where you would have expected to see the greatest slow down would be in the iron ore price and that is as strong as ten men … but I’m saying I would anticipate prices to begin to turn down,” Mr Evans told the RIU Good Oil conference in Fremantle today.
“I suspect there is a degree of stockpiling at the moment.
“Inventories are very high, the highest they have ever been.
Mr Evans stated China would take “a breather” with iron ore buys in the next 12 months but that its appetite would return as the Asian superpower continued its unprecedented industrialisation, provided authorities staved off a return to high inflation.
“They’ve been unsuccessful so far in containing inflation pressures, so there is this balancing act about wanting to increase housing affordability.
“So (the government is also) discouraging the investment bubble in housing as well as wanting to contain inflation pressures, and balance that off against maintaining decent growth momentum,” he said.
Mr Evans stated the long-term oil price would likely rise to $US100 a barrel from about $US83 a barrel currently as industrial production in OECD countries fell.
He was more sceptical about the short-term outlook for oil, saying global growth – the critical factor driving the oil price – would fall below trend next year at 3.5 per cent.
“We think that will be a low point,” Mr Evans said.
Stock Resource analyst Peter Strachan stated oil would outperform all other commodities due to supply constraints.
Mr Strachan was also bullish about copper for the same reason.
“Up until now, the total copper that has been mined and consumed is 550 million tonnes and in the next 20 years, we are going to consume that again, so where does that come from?” Mr Strachan asked.
source : www.wabusinessnews.com.au
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Submited at Tuesday, September 6th, 2011 at 10:00 pm on Business by blum
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