China’s Green Future Is Great for High-Grade Iron Ore Price

Pollution is a huge problem in China. And it’s got nothing to do with some distant global warming prediction.

In China, pollution kills. According to Berkeley Earth, smog in Beijing was so bad that breathing for a day was as unhealthy as smoking 40 cigarettes.

China pollution

Source: Inverse Science

Reported by The Guardian:

Air pollution is killing about 4,000 people in China a day, accounting for one in six premature deaths in the world’s most populous country, a new study finds.

Physicists at the University of California, Berkeley, calculated about 1.6 million people in China die each year from heart, lung and stroke problems because of incredibly polluted air, especially small particles of haze. Earlier studies put the annual Chinese air pollution death toll at one to two million but this is the first to use newly released air monitoring figures.

China’s cleaning up their act

That’s why China’s government has been trying to clean up their act. They limit the amount of cars in busy cities. They’re one of the biggest investors in green energies. And now the government expects the steel industry to buy higher-grade iron ore.

As reported by Bloomberg:

Iron ore’s on the rise as an environmental clean-up in China tightens the supply of higher-grade material that’s less polluting and allows steelmakers to maximize production.

‘…The commodity has rebounded since the start of November. While China’s bid to curb pollution by cutting steel supply this winter is hurting overall consumption of ore, it’s supporting demand for higher-quality material because the variety is more efficient to use. Demand for ore could also expand next year as rising profits encourage steel mills to increase production and furnaces in the top supplier ramp up after the end of winter curbs.

Iron ore price predictions

According to Bloomberg, 2020 iron ore futures contracts trade around US$60 a tonne. And analysts are predicting the price of iron ore might fall to US$56 a tonne by 2020.

Iron ore futures

Source: Bloomberg

Will iron ore rise for now, but fall in the long term? Maybe. It’s extremely hard to predict the price of commodities, especially one as volatile as iron ore.

But if China continues to demand more steel and build more things, the price of iron ore should either remain stable or rise in the long term.

Regards,

Härje Ronngard,
Junior Analyst, Markets & Money

PS: Commodities prices came back in 2016 and rallied hard in 2017.  Could they continue to rally heading into 2018?

Our resource analyst, Jason Stevenson thinks so. Jason is one of the sharpest minds when it comes to the resource sector. And he’s written a report about his top 10 mining stocks trading on the ASX right now.


Harje Ronngard is a Junior Analyst at Markets and Money. With an academic background in finance and investments, Harje knows how simple, yet difficult investing can be. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. It’s not good enough to be right on average when it comes to investing. The market is volatile and it only takes one bad day to ruin your portfolio. You don’t want to end up like the six foot man that drowned in the river that was five foot deep on average. It’s why Harje is constantly reminding investors of their downside risk here at Markets and Money. He does so by simply asking just two questions.  What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Markets and Money readers. Right now Harje is focused on managing research and investments over at the Legacy Portfolio. An investment publication designed to significantly grow investor’s wealth over time with deeply undervalued businesses. Harje also contributes his insights in Total Income, headed by income specialist Matt Hibbard. Harje loves cash-rich businesses, so he feels right at home amongst Matt’s high yielding income plays.


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