Iron ore hits record-low as demand drops

By the end of 2022, the price of iron ore is expected to hit their lowest level in three or four years as global demand for the commodity continues to slow down, particularly from China, the world's largest consumer of iron ore.

In recent years, China has been cutting down its iron ore demand especially after the government placed restrictions on the industry to reduce carbon emissions. In 2021, the country's iron ore import fell to 1.12 billion tons from 1.17 billion tons in the prior-year period.

Expectations for 2022 from the production side are no better with Australia, the world's biggest exporter of iron ore, projecting a 0.6% drop in global steel output to 1.947 billion tons.

"Combined with growing global recessionary fears, new COVID-19 outbreaks and weakness in China's housing sector have dampened world steel and iron ore demand in recent months," the Australian government said in its October quarterly report.

A Reuters survey in October showed that prices are expected within the $90/ton to $115/ton range by the end of the year. MetalMiner data shows the price in early 2022 were at $160.30/ton at the beginning of Russia's war against Ukraine.

The decline comes despite forecasts of growth in the demand for iron ore through to 2026. The global market for iron ore is estimated to reach 2.7 billion metric tons, while production is expected to reach 3.17 billion metric tons.

Until definite signs of recovery are observed, maybe it is best to err on the side of caution regarding iron ore prices, especially considering the threats of a recession in Europe and the persisting problems in China's property sector, which could heavily impact on the demand for the key steelmaking ingredient.