Can Iron Ore Prices Continue Their Stellar Run in 2017?



Iron ore’s stellar 2016

Commodity prices had a stellar 2016 despite many analysts’ expecting the contrary. This was especially true for iron ore. Due to increased supply growth and weaker Chinese demand growth, the prospects for iron ore prices looked quite dim at the beginning of 2016.

Then came the stimulus from the Chinese government in support of domestic steel production. This move underpinned iron ore’s price rally in 2016. Speculative activity and a shortage of coking coal further stoked iron ore’s price rally. The price of the steelmaking commodity rose 81% in 2016. Toward the end of the year, Donald Trump’s US presidential win led to a rally in commodity prices.

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Iron ore companies’ ascent in 2017

2016 was nothing short of a miracle for commodities (DBC), including iron ore. Iron ore stocks such as Rio Tinto (RIO), BHP Billiton (BHP) (BBL), Vale (VALE), and Cliffs Natural Resources (CLF) climbed to multiyear highs in the year.

The graph above shows iron ore companies’ 2016 price movements. Cliffs Natural Resources (CLF) had the steepest rise among its peers at 404%. Firmer seaborne iron ore prices also helped other miners (XME). Vale rose 141%, while Rio Tinto and BHP Billiton rose 35% and 40%, respectively.

What lies ahead?

With 2016 behind us, investors are wondering whether 2017 will sustain iron ore’s gains along with the gains of miners.

In this series, we’ll look at the seaborne iron ore industry’s 2017 outlook and explore how its supply and demand could play out in 2017. This could give us a clue about the future direction of iron ore prices.


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