$100/t iron ore next year: Evans

Westpac chief economist Bill Evans has predicted the iron ore price will go over the $100 per tonne mark next year, on the back of improved Chinese consumer confidence.

Speaking at the RIU Good Oil conference in Fremantle today, Mr Evans said while iron ore prices had hit a five-year low he believed a price correction was coming soon.

“I believe the world economy is picking up, the iron ore price is going to go back up over $100 next year and probably well into the $120s by 2016,” he said.

Speaking about China, where most of Western Australia’s iron ore ends up, Mr Evans said a change in policy was beginning to drive growth and demand.

“At the moment, however, the Chinese economy is looking pretty sick,” he said.

“Consumer confidence is at near-record lows.

“This is the worst the housing market has ever been in China.

“So you look at that and go ‘shock, horror, I can understand why the iron ore price is so low’.

“Of course 70 per cent of steel to China goes into construction and 70 per cent of that goes in residential, and the residential market is underperforming.’’

Mr Evans said while policy was not moving fast enough at the moment, a lift in credit and fiscal stimulus was only months away.

“Next year I’m expecting to see the China story improve the market,” he said.