Insights

CBA (ASX:CBA) warns iron ore price will fall by 27% in the next year

CBA analysts believe the iron ore price is going keep falling.
The post CBA (ASX:CBA) warns iron ore price will fall by 27% in the next year appeared first on The Motley Fool Australia. –

Analysts from Commonwealth Bank of Australia (ASX: CBA) believe that the iron ore price is going to keep falling.

There are a number of different opinions out there, but this one comes from Vivek Dhar, an analyst for mining and energy commodities at CBA.

Despite the fact that the iron ore price has roughly halved over the last five months, the call is that iron ore could fall more than 25% to US$85 per tonne by the end of next year, according to reporting by the Australian Financial Review.

The main reason for that negative outlook is because of China’s efforts to reduce its emissions by cutting how much steel is being produced.

Mr Dhar reportedly wrote:

These steel output cuts, driven by emission reduction goals, aim to cap China’s steel output in 2021 at 2020 levels.

China’s steel output is crucial to iron ore prices because China accounts for 70 per cent ‑ 75 per cent of the world’s iron ore imports.

What do the big ASX 200 miners think about the iron ore price?

There are a few very large S&P/ASX 200 Index (ASX: XJO) miners on the ASX such as BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG).

The resources giant BHP released some thoughts on the iron ore price when it reported its FY21 result.

It noted that the iron ore prices have been elevated since the Brazil dam disaster that disrupted the iron ore market in early 2019. The miner said that conditions have been “particularly tight” since the second half of the 2020 calendar year, with a new record for the iron ore price. Lower iron ore production from some other major iron ore producers contributed to this.

However, BHP said:

Medium term, China’s demand for iron ore is expected to be lower than it is today [on 17 August 2021] as crude steel production plateaus and the scrap-to-steel ratio rises. In the long-term, prices are expected to be determined by high cost production, on a value-in-use adjusted basis, from Australia or Brazil. Quality differentiation is expected to remain a factor in determining iron ore prices.

However, BHP did say that it’s positive about the outlook for long-term global economic growth and commodity demand. Population growth, the infrastructure of decarbonisation and rising living standards are all expected to drive demand for energy, metals and fertilisers for decades to come.

The post CBA (ASX:CBA) warns iron ore price will fall by 27% in the next year appeared first on The Motley Fool Australia.

Should you invest $1,000 in BHP right now?

Before you consider BHP, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and BHP wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

October is ‘crash’ month: Will history repeat for the ASX 200?

5 things to watch on the ASX 200 on Friday

Here are the top 10 ASX shares today

Could the Fortescue (ASX:FMG) share price slide to $12.50 by Christmas?
Own BHP shares? Here’s the latest on the miner’s nickel and EV battery play

Motley Fool contributor Tristan Harrison owns shares of Fortescue Metals Group Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!