Deutsche cut its iron ore outlook today:
Still far too high, which explains why they retain a RIO buy, but low enough to cut FMG to sell:
With the drop in our iron ore price forecasts over the medium to long run on weaker than expected steel demand and an increasingly oversupplied iron ore market we have reduced our FMG earnings forecast by 17% for FY17. Reductions in our assumed all-in costs have offset the iron ore price downgrade in FY16. Our FMG NPV has decreased by c. 35% to A$1.53/sh mostly due to the downgrade in our long run iron ore price from US$80/t to US$66/t (both real 2015 $) which is based on a combination of marginal costs and incentive pricing. This has offset reductions in our assumed long run mining costs and medium term strip ratios. As FMG is trading well above our revised PT, which is set broadly in line with our DCF derived valuation, we are downgrading the stock to a SELL.
