We have increased our iron ore price forecast to an average of USD70/tonne in 2017 comparedto USD65/tonne previously as Chinese imports of the ore remain strong due to steady steel production.Long-term infrastructure projects initiated during H216-Q117 will ensure prices of iron ore remainelevated in Q317, with cooling of demand and hence prices to kick in after the 19th National PartyCongress in Q417 that will refocus growth away from heavy industries to services.
We have revised upwards our iron ore forecast to an average of USD70/tonne in 2017 from our previousforecast of USD65/tonne, but maintain our downbeat iron ore forecasts for 2018-2021. China's steeldemand will be supported over the remainder of 2017 by the long-term infrastructure projects initiated in2016 and Q117. The country's real GDP grew by 6.9% y-o-y in H117, and our Country Risk team hasupgraded our 2017 and 2018 real GDP forecasts to 6.6% and 6.3% from 6.3% and 5.8%, respectively(see our Country Risk analysis 'Economy To Lose Steam Despite Strong H117 Figure', July 17). In otherwords, growth will still slow over the coming quarters, and the waning of domestic steel demand in 2018will eventually lead to an oversupply of steel on the global market, pushing prices downwards.