Australian LNG Commodities Iron ore price

Why iron ore is a buy and LNG is a sell

Wednesday 27 April 2016

Just kidding, both are sells. But right now the relative valuation differentials are stark, from UBS comes their weekly estimate of the earnings outlook versus current spot prices:

All else equal, our BHP & RIO earnings estimates for CY16E would be 97,815% (very low base) and 150% higher respectively, under a spot scenario. At spot, S32’s CY 16E earnings would increase 47% to US$89m. Iron ore: The spot iron ore price is 38% above our CY 16 forecast but combined with FX and freight implies a 68% upgrade to FMG’s FY 16E earnings.

Big iron stocks are still heavily discounted (quite rightly). But for the LNG it’s the opposite:

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.