Analyst Upgrades Pile Up: Iron Ore Is in the Perfect Bull Storm


May. 28 2019, Published 11:43 a.m. ET

Analysts’ iron ore price upgrades

Due to supply tightness and continued strong demand from China (FXI), analysts are turning more bullish on iron ore. Recently, many analysts have upgraded their iron ore price forecasts.

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UBS raised iron ore price forecast

UBS has raised its price forecast for iron ore by 8% for 2019 and by 4% for 2020 to $90 per ton and $80 per ton, respectively. The company expects the earnings of major iron ore producers (XME) to rise 17% in 2019. It also believes that this will lift the valuations of BHP Billiton (BHP), Rio Tinto (RIO), and Fortescue Metals Group (FSUGY)—but not enough for it to recommend “buys” on these names.

Goldman Sachs and RBC

Goldman Sachs (GS) believes that while iron ore prices have peaked, they’ll remain elevated as strong demand from China continues. As reported by S&P Global Platts, GS believes that while Chinese demand has surprised on the upside, Vale’s (VALE) production has surprised on the downside. In light of this demand-supply mismatch, the company has raised its iron ore price forecast by 12% to $91 per ton. However, it maintains that the iron ore market is near its peak in terms of supply tightness.

According to RBC Capital Markets, iron ore’s price rise over the last five months has been “exceptional.” It’s lifted its price forecast by 24% to $82 per ton for 2019 and $65 per ton for 2020. The company expects a deficit of 83 million tons of iron ore this year, which should be followed by a surplus of $55 per ton in 2020.


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