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Iron Ore Price Rally Is Not Causing Excitement on Wall Street

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Sep. 7 2016, Published 1:01 p.m. ET

The iron ore price rally

Iron ore prices have remained firm in 2016. Year-to-date (or YTD), as of September 5, 2016, the benchmark iron ore prices have increased by 39%. This is despite the majority of market participants believing the contrary.

The stimulus provided by the Chinese government helped the demand side, while supply got somewhat deferred. Most analysts are still bearish (SPXS) on the medium- to long-term outlook for iron ore prices.

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Performances of iron ore miners

With stronger iron ore prices YTD, iron ore miners have recuperated from some of their losses. Cliffs Natural Resources (CLF) has outperformed, with a YTD rise of 243% as of September 2, 2016.

Fortescue Metal (FSUGY) and Vale (VALE) have risen by 162% and 77%, respectively. Rio Tinto (RIO) and BHP Billiton (BHP) (BBL) have risen by 6% and 13%, respectively.

Series overview

In this series, we’ll look at Wall Street analysts’ recommendations and ratings for these iron ore miners. It’s important to note that analysts’ estimates usually lag behind price movements, and we see upgrades when stocks have already risen. As for downgrades, they’re apparent when a company has already seen lower prices.

That being said, changes in analysts’ estimates are key drivers of short-term price movements. You should keep track of changes in analysts’ estimates because they offer insight into what the market expects from a given company.

We’ll start by looking at analysts’ ratings for BHP Billiton.

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