The latest commodity price forecast revisions from Commonwealth Bank of Australia (ASX: CBA) could impact ASX dividend investors eyeing long-term payouts from the likes of Fortescue Metals Group Ltd (ASX: FMG) and BHP Group Ltd (ASX: BHP).
Both of the iron ore giants showered investors with record dividend payouts over the past year on the back of all-time high prices for the industrial metal. But CBA is forecasting iron ore prices are due for a significant retrace.
What’s been happening with iron ore?
Iron ore reached nearly US$220 per tonne in July last year before sliding to US$92 per tonne in November and then rebounding once more. It’s currently trading for just under US$135 per tonne.
With the miners flush with cash, much of which was returned to shareholders, this sees BHP currently trading on a 11.0% trailing dividend yield and Fortescue paying a whopping 15.2% yield.
But if CBA’s commodities team has it right, the big miners may need to tighten their belts in the face of a 27% drop in iron ore prices by year’s end.
What is CBA forecasting?
CommBank’s director of mining and energy commodities research Vivek Dhar said CBA has “made significant revisions to our commodity price deck”.
According to Dhar (as reported by The Australian Financial Review):
Industrial metal and iron ore prices remain beholden to Chinese policy. We anticipate that China’s COVID‑19 lockdowns will ease enough by [the second half of] 2022 to enable policy support measures to boost China’s demand impulse. Base metal prices should lift from [the third quarter of] 2022 to [the fourth quarter of] 2022 as a result.
Our declining iron ore price profile indicates China’s plan to reduce steel output production this year. Steel production will likely need to be constrained later this year, echoing restrictions [imposed in 2021].
CBA forecasts iron ore prices will fall to US$120 per tonne by the end of September and finish 2022 trading for US$100 per tonne.
Gazing further ahead, CBA analysts see a further 20% slide the following year, with iron ore trading for US$80 per tonne at the end of 2023 and likely staying in that range into 2025.
The post Iron ore price to fall 27% by end of 2022: CBA appeared first on The Motley Fool Australia.
Wondering where you should invest $1,000 right now?
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.
*Returns as of January 12th 2022
More reading
- Why the CBA share price is beating the market in May
- Why did the Fortescue share price lag the ASX 200 in May?
- Why this rich lister is buying ASX dividend shares that ‘pay you to wait’
- Leading brokers name 3 ASX shares to buy today
- Why I’d buy these 2 ASX 200 shares
The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
from The Motley Fool Australia https://ift.tt/jpBsQhf
Leave a Reply