Mac Bank: Brace for “very ugly” iron ore prices

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From Smart Investor:

“Some of the Chinese supply will go, but I think overall the Chinese will be pretty tough to displace,” Graeme Train, a commodities analyst with Macquarie in Shanghai, said.

…He is forecasting an average price of $US62 a tonne in the second half of this year, but said there was a risk the price went “way below that” for short periods as production levels were maintained.

“It could get very ugly,” he said.

Xu Xiangchun, the chief information officer at Mysteel, said the price could move as low as $US50 a tonne after the Spring Festival Holiday finishes next week.

Another factor in favour of Chinese miners maintaining production is a push for tax relief by peak body China Iron and Steel Association.

Now they’re getting it. And from Reuters:

Australian billionaire Gina Rinehart’s $10 billion Roy Hill iron ore mine is on track to begin exporting in September 2015 and will have shipped 5 million tonnes by the end of the year, a company executive said on Wednesday.

“We’re certainly on budget. We remain ahead of overall schedule,” Garry Torte, Chief Financial Officer of Roy Hill, told Reuters.

…Korte said that Roy Hill sits in the bottom quartile of iron ore producers and as a result is protected from dips in the iron ore price.

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You won’t be when it’s at $35 per tonne.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.