A remarkable month for iron ore with prices hitting two year highs at $80/t. The global asset allocation story has played a big part in the latest rally, with iron ore benefiting along with most industrial metals and minerals as money switched out of bonds into commodities, before a sharp reversal of this flow on the final day of the month as investors took profits. Steel specific factors have also been supportive – notably the knock-on effect of high coal/coke costs and Beijing's commitment to steel capacity closures. But the coal/coke "cost-push" story has largely run its course and steel mill margins are under pressure again. This will inevitably feed through to iron ore pricing. Our revised forecast for Q4-16 is $67/t, giving an annual average price of $57/t - marginally above last year's price of $55/t. Not many picked that at the start of the year!
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As global demand weakens and commodity prices fall, we're seeing a challenging environment in the metals and mining industry. Mining companies are increasingly coming under pressure to reduce operating costs, causing many to shift their strategic planning, delay new investments and look to long-term future growth.
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Commodity market report | Nov 2016
Global iron ore short-term outlook November 2016
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