If you're a shareholder of BHP Group Ltd (ASX: BHP), Fortescue Metals Group Limited (ASX: FMG), or Rio Tinto Limited (ASX: RIO), there will no doubt be one metal in particular that is of interest to you – iron ore.
Due to the significant contribution that their iron ore operations have on their respective profits, the iron ore price has a big impact on these mining giants' success.
This morning, BHP released its production update for the fourth quarter and full year. Within that update the Big Australian revealed that it received an average price of US$113.10 per tonne in FY 2022 for its iron ore. This was down 13% year on year from US$130.56 per tonne in FY 2021.
Investors may now be wondering where iron ore goes from here. In light of this, let's take a look to see what one leading broker is forecasting for the steel making ingredient.
Where is the iron ore price heading?
According to a note out of Goldman Sachs at the end of last week, its analysts are expecting iron ore prices to soften in 2023.
Firstly, Goldman expects an average price of US$120 per tonne for benchmark iron ore 62% fines in 2022.
After which, its analysts are expecting a 16.7% decline in FY 2023 to US$100 per tonne. And, as you can see below, the broker doesn't expect prices to stop falling until 2026. At that point, the broker expects the iron ore price to rebound slightly.
Goldman Sachs' forecasts are as follows:
- US$120 per tonne in 2022
- US$100 per tonne in 2023
- US$80 per tonne in 2024
- US$75 per tonne in 2025
- US$81 per tonne in 2026
All in all, the broker appears to believe that the iron ore price peak is now long behind us and it could be a downward trend from here.
