Australia's highly profitable iron ore sector is expected to ride out market volatility as fears of additional COVID-19 lockdowns in China see a 10 per cent price drop to start the week.
The fall across commodities was driven by concerns of China's COVID-19 lockdowns expandingThe Australian share marketCommonwealth Bank director of mining and energy commodities research Vivek Dhar said the drop came as a result of COVID-19 lockdowns in China and what they could mean for demand of Australian ore.
Mr Dhar expected the next few months would see "demand weakness" from Chinese steel mills, which would likely drive the price lower.China's key policy makers, its politburo, will meet for its April quarterly meeting this week. "The key ones to keep an eye on … is whether we see the property sector see some easing credit conditions," he said.Vivek Dhar expects Australian iron ore miners to remain profitable despite price volatility.
Another factor at play was an announcement by China last week that it planned to further reduce steel output, as it did in 2021."Prices went from a peak of $US233 per tonne in mid-May to $US87 per tonne in mid-November. The same potential impact is possible this year."Despite this latest price drop and expectations of further falls, the director of mining and energy commodities research did not believe Australian iron ore production was at risk.