The AFR has another bullish iron ore take this afternoon:
Commonwealth Bank senior economist Michael Workman said market expectations had wrongly indicated the iron ore price would be 10 to 20 per cent lower than its current value. “The iron ore price has held up at much higher levels than people thought were possible,” he said. “The market tended to be sharply divided six to nine months ago on the outlook for China’s activity levels and the flow of data recently has confirmed that this year, and as it looks for next year, China will achieve its targeted growth rates. That’s been pretty assuring for the market.”
…Daniel Morgan, a commodities analyst at UBS, said the end-of-year slump the market usually relies on had not materialised. “The price performance has been higher than what we expected over the last month or so and the central driver has been China’s steel production rates which have been stronger for longer through 2013,” he said. “This year the feature of the trade has been how China’s steel production rates have been very strong since the middle of year and haven’t really rolled over.”
…He described the thinking among miners following a conference at the end of November as “cautious optimism” with regards to the price outlook, but conceded “even they were looking at the prices and they were suggesting they see downside risk into next year”.
Fair enough but it’s rear vision mirror stuff. Yes, Chinese growth has been strong and so has iron ore. But why? China launched a $2 trillion yuan stimulus mid year, that’s why.
FMG chimes in today as well:
Fortescue Metals Group is tipping the iron ore price will sit between US$110 and US$130 over the next two years.
Fortescue, the world’s third biggest iron ore miner, predicts the price would be highly unlikely to fall below US$100 a tonne in the near term — the next two to three years.
Another reason for the very unusual stability in the ore price has been the Pilbara cartel’s control over supply so it will take a significant oversupply to diverge the major players interests.
I still think that that will arrive through the first few quarters next year and iron ore will decline but not all agree now:
China might save iron ore again do it again but if so it will not be rebalancing as promised.
