Iron Ore Outlook Raised by World Bank on Recovery, Oil on Supply

Iron ore prices will be higher this year and in 2014 than forecast in July as global manufacturing improves and China’s metal imports rebound, while the outlook for oil was raised on supply disruptions, the World Bank said.

Iron ore is expected to average $134 a dry metric ton this year and $135 a ton in 2014, up from a July prediction of $120 and $125, respectively, the report showed. The World Bank stuck to an outlook for iron ore prices to average $145 a ton in 2025.

China’s economy expanded 7.8 percent in the third quarter, from 7.5 percent in the second quarter, and its iron-ore imports rose to a record 74.6 million tons in September on demand for steel, customs data show. The iron-ore market is the biggest seaborne commodity traded after oil.

“Prospects for the metal market depend importantly on Chinese demand,” the World Bank wrote. “If robust supply trends continue and weaker-than-anticipated demand growth materializes, prices could follow a path considerably lower than the baseline presented in this outlook.”

The outlook for crude in 2013 was raised to $105 a barrel from a July estimate of $100.70 a barrel, while the forecast for next year was raised to $105.70 from $99.60 a barrel. The oil price is a weighted average of West Texas Intermediate, Brent and Dubai, according to the report.

“The recent uptick in oil prices reflected production declines by Libya and Iraq, a loss of 1 million barrels a day each and, less so, fears that the Syrian conflict may spread to the Gulf and cause major disruption in oil supplies,” it said.

Oil Forecast

The World Bank expects oil to average $97 a barrel in 2025 on growing supplies as well as substitution away from oil.

The forecast for Australian coal prices was cut to $85 a ton this year and $88 a ton in 2014, from $90 and $91 predicted in July, respectively. Aluminum may average $1,800 a ton in 2013 and $1,850 next year, down from a previous outlook of $1,900 a ton for this year and $2,100 the next.

Aluminum stocks have been rising since the end of 2008 and remain near a 10-year high, according to the bank. Metal prices as a whole are expected to slip 8 percent this year on abundant supplies and weakening demand, based on the report.

“Most price risks are on the downside and depend mostly on the path of the Chinese economy,” the World Bank said.

The bank cut its forecast of 2013 average corn prices to $250 a ton from $295, and the outlook for Thai rice to $500 a ton from $545. Corn is seen at $248 a ton in 2014, down from $270 previously.

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

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