Macquarie: Higher for longer
Macquarie upgraded its price forecasts for iron ore (PICK) and coal in January 2018. It revised its iron ore and steel prices on the back of improved ex-China demand and a rising cost curve. The firm stated, “The whole complex remains vulnerable to a slowdown in the Chinese housing sector, but shrinking Chinese steel capacity should prevent a rebound in Chinese steel exports, a positive for steel capacity utilisation and margins in the developed world.”
ANZ (Australia and New Zealand Banking Group) also believes iron ore prices should remain elevated. The company expects 62% iron ore fines averaging around $70 per ton in the first half of 2018. It also notes that risks to this forecast include:
- the ramp-up of high-grade supply locally
- the deceleration of Chinese construction
- further tightening in Chinese credit markets
ANZ also believes that, due to pollution control measures, the switch to higher-grade, imported ore should continue in China, supporting prices.
Goldman Sachs: Bullish price target
In a report published on February 9, Goldman Sachs’ (GS) analyst Jeffrey Currie said the company is maintaining the bullish three-month iron ore price target of $85 per ton. He cited a jump in Chinese steel demand as the major key driver behind this bullish forecast. He expects Chinese steel output to jump as the winter curbs come away. He also expects iron ore prices to average $68 per ton in 2018 and $63 per ton in 2019.
Credit Suisse: Upgraded price forecasts
- 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 fell below $50 per ton
- China’s demand, supported by infrastructure investment growth of ~20% per year