From The Australian:
GLOBAL investment bank Morgan Stanley has downgraded its price forecasts for bulk commodities and warned that the spot price of iron ore could fall as low as $US83 a tonne in the coming months.
…“Similarly, hard coking coal prices could have downside of 5 per cent to 8 per cent from the current level of $US164 a tonne free-on-board. So there is still risk to be contemplated for these miners.”
…“In our view, prices of steel making raw materials can recover in fourth quarter 2012 and in 2013, but spot prices for both iron ore and coking coal first have to fall below the marginal cost of seaborne (not Chinese) production to drive out the short-term supply overhang,” he said.“In addition, Chinese steel mills have to complete finished product and raw material de-stocking to stabilise both steel and raw material prices while a stimulus-driven demand recovery has to take hold to trigger a restocking cycle.”
…“If the benchmark averages below $US110 a tonne for full-year 2013, we see Fortescue getting tight for funding,” said Mr Fitzpatrick.
In effect, as I’ve been saying for some months, the much celebrated iron ore price floor theory (previously championed by MS) is bunkum and local production must be cut to stabilise the price. Whocouldanode?
