Via Credit Suisse:
■ Earnings down: Consistent with our global team, we’ve adjusted our 2Q iron ore price forecasts from US$95/t to US$65/t. We had previously noted here our forecasts being well out of the money. We’ve made no changes to our forecasts beyond 2Q, continuing to run US$70/t in SepQ and US$55/t in DecQ where cyclical destocking typically contributes to lower prices. We continue to see the end of 2017 as the beginning of a period of oversupply, underpinning our S/D balance of +100Mt excess supply in CY18, the magnitude of which we try and capture in our US$58/t CY18 assumption. Net impact is ~18% lower eps this FY.
■ Where to from here? We’re comfortable maintaining our US$70/t 3Q price. We note that steel demand remains solid – based on our commodity analyst’s trip to China – but are cognisant that financial sector tightening has been a headwind. That said, we think this has already been priced in and see tailwinds if Chinese authorities provide stimulus ahead of the 19th Party Congress.
