From the SMH, Citi has joined myself and Goldman in the iron ore bear camp predicting a crash to $US80 a tonne within the next two years, and:
…Mr Wilkins forecast a 9 per cent fade in Rio’s earnings from 2014 to 2016, saying the lower iron ore prices would offset increased production and cost cuts.
”Iron ore is the dominant earnings driver for the sector and [the] only positive ray of light is that $US80 a tonne iron ore has already been priced in and/or multiples re-rate as long expected decline finally happens,” Mr Wilkins said in a note to investors.Fortescue Metals was also downgraded to neutral, with Citi’s price target for the stock falling from $6.70 to $5.90
Meanwhile, Atlas was downgraded to sell while the same recommendation was maintained for Mt Gibson.
Mr Wilkins said the main driver for Citi’s downgrade in the price of iron ore was producers flooding the market and ”resilient” Chinese domestic production.
Citi also forecast a return of Indian iron ore up to $40 million tonnes. All true, with downside risks when and if China reforms…
