Rebuilding disaster-hit Japan and a revival in demand from top consumer China should help iron ore prices rebound this year after a stalled bid to extend last year's more than 40 per cent gain.
The outlook on demand for the steelmaking raw material from China and Japan, the world's two biggest buyers, as well as the ever-contentious iron ore pricing regime are expected to dominate discussions at three conferences this week in China and Australia.
Spot iron ore prices had lost about 14 per cent since touching record highs near $US200 a tonne in mid-February as slow Chinese steel demand turned off buyers and worries emerged that disruptions in disaster-stricken Japan's steel output could lower its iron ore imports.
Iron ore prices may continue to fall over the next two to three months, before a demand-driven rebound happens, said Judy Zhu, commodity analyst at Standard Chartered Bank in Shanghai.
"But later this year, around the end of the second quarter, we may see China restocking and the rest of the world especially Western steel mills ramping up output in response to a recovery in demand," said Zhu, adding she has "full confidence" prices could jump back towards $US200 a tonne.
Japan's rebuilding of its ruined infrastructure would be key in reviving regional demand for steel and consequently, iron ore, in a colossal reconstruction some analysts have said could cost up to $US180 billion.
Assuming around 10 per cent of that bill is dedicated to steel, a two-year reconstruction programme could consume an additional 30 million tonnes of steel, according to estimates by Australia and New Zealand Bank.
That is equivalent to an annual 12 per cent increase in Japan's steel output and iron ore and coking coal imports over the next two years versus zero cumulative annual growth in the past decade, ANZ said. (Business Spectator)
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