Iron ore prices are expected to remain under pressure in 2022 after their rally ended and values collapsed to levels below previous forecasts, says Fitch Solutions. The research firm is consequently revising down its iron ore price forecast for 2022 to $90/tonne from $130/t.

Chinese demand for iron ore stemming from the country's V-shaped economic recovery and the government's major stimulus plan in supporting the construction industry peaked in the first half of 2021. This happened with the peak seasonal activity for the construction sector in May-June, and China's energy crunch that resulted in declining steel production – and therefore iron ore demand – starting in June.

“While China's energy crunch has started to ease and production curbs on steel are also being lifted gradually, we do not expect the strong demand impact that had stemmed from stimulus to return in 2022 as construction projects reach completion and the pipeline of new projects lessens, with the Chinese Government focusing on tightening credit lines,” Fitch Solutions says in a report seen by Kallanish. “Additionally, we see rising risks to the Chinese property market and thus iron ore demand from the construction sector, following Evergrande’s financial difficulties.”