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.
The full text of this article is available to MacroBusiness subscribers
