FROM THE FEBRUARY 26, 2015 ISSUE
What are the consequences for Latin
America from lower iron ore prices?
Iron ore prices are down by almost half from a year ago to about $60 per metric ton and are hovering near five-year lows amid concerns about the medium-term supply and demand outlook for the commodity, with many analysts expecting prices to stay between $60 and $65 per metric ton for the next two years. How are lower iron ore prices affecting companies? What do lower prices mean for major iron ore producing economies in the region, such as Brazil?
Alicia García-Herrero, chief economist for emerging markets at BBVA Research: "We expect the developments in China to have significant implications for major iron ore producing economies in the region. China is the world's largest consumer of iron ore, importing more than 930 million tons in 2014. The country's largely investment-led growth model through much of the last decade helped to fuel a commodity super cycle, propping up iron ore prices and benefiting commodity exporters. Brazil, one of the largest producers of iron ore in the world, together with Australia, is a clear example. Brazil exported 170 million tons of iron ore to China in 2013, compared to 60 million tons in 2005. According to our Commodity Concentration Index, this would imply that Brazilian iron ore exports' dependency on Chinese demand increased by 48 percent between 2005 and 2013. Other iron exporters in the region also saw their dependency increase during the same period, including ..." MORE
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