Iron ore prices could nearly halve as China’s property nightmare weighs on Australian resources demand, even as Beijing attempts to boost its economy.
Iron ore prices could nearly halve by next year as China’s deepening property crisis poses a threat to the value of Australia’s top export, as Beijing scrambles to spur borrowing in an economy hobbled by a strict COVID-19 zero ambition.
The Chinese government has set a growth target of around 5.5 per cent for this year, but analysts expect a far weaker outcome. Commonwealth Bank projects 2022 GDP at just 2.2 per cent. Nomura last week cut its 2022 forecast to 2.8 per cent and Goldman Sachs reduced it to 3 per cent.Carol Kong, an economist at Commonwealth Bank, said she was very bearish on the Chinese economy.
The offshore yuan slipped to its lowest in two years, trading at ¥6.86 to the US dollar, not far from Monday’s trough of 6.87 per dollar. The dire outlook has led Commonwealth Bank to forecast around a 40 per cent fall in prices of key Australian commodity prices between March this year and next year.
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