Australian Iron Ore State Increases Price Forecast 12%

Australian iron ore producing state increased its price forecast 12 percent after demand rose in China, its largest trading partner.

Iron ore is forecast to be $47.70 a metric ton in fiscal year 2017, the state government said Thursday. This is higher than $42.50 predicted in December when exports were low.

This year, the commodity has risen 28 percent to close Wednesday at $55.57 a metric ton, rebounding from three straight annual declines on China’s improving economic outlook and increase in demand from infrastructure and property sectors.

“Sustained growth in demand for steel in China is considered unlikely over the medium-term,” the government said in budget papers. “Further headwinds will likely come from the ongoing process of structural change in China where household consumption, which is not very steel-intensive, becomes relatively more important for growth.”

However, increase in production from the top three producers, Rio, Vale and BHP are expected to pressure price over the medium-term. While supply is expected to outpace growth in demand until 2018-19, the market will return to normalcy the following year, the government said.