Goldman Sachs: Prices to sink below $50
Goldman Sachs (GS) believes that iron ore prices should sink back to $50 per ton in 2018. The firm feels the supply increase due to the ramp-up of Vale’s (VALE) S11D mine would increase the plentiful supply and, at the same time, China’s demand should decline.
Goldman Sachs analyst Hui Shan said that prices should decline to $60 per ton in three months, $55 per ton in six months, and $50 per ton in 12 months.
HSBC: Not at bottom yet
HSBC also believes that the recent stabilization is not a sign that a bottom has been reached. In a note in October 2017, HSBC’s metals and mining team noted that weaker demand dynamics should push the market into a surplus of ~40 million tons in 4Q17. It sees prices falling below $60 per ton over the first half of next year.
Credit Suisse: Upgraded price forecasts
Credit Suisse (CS), on the other hand, upgraded its iron ore price forecasts for 2018, 2019, and 2020. CS analyst Matthew Hope upgraded prices on a more positive outlook for China and ex-China steel output.
The major reasons for upgrading the iron ore price (PICK) outlook are as follows:
- greater profitability of Chinese steel mills
- more conservative supply forecasts from four major iron ore producers—Vale (VALE), BHP (BHP), Rio Tinto (RIO), and Fortescue Metals Group (FSUGY).
- CS’s view that supply would drop rapidly if prices drop below $50 per ton
- China’s demand to be supported by infrastructure investment growth of ~20% per year