Iron ore prices for June 26, 2020:
Chinese markets were closed for Dragon Boat Festival. Data is quietly improving:
Brazil is loudly getting worse:
UBS is still bullish:
Consumer led recovery in H2 20e. COVID re-emergence the greatest risk
If China’s emergence from COVID-19 lock down is anything to go by, then H2 20e should see strong consumer demand. In China a V-shaped recovery appears underway as consumers flock back to showrooms (property, automotive and household goods). Our expectation is that RoW demand bounces back in H2 20e and that production risks in emerging markets restrict supply. Chile (copper) and Brazil (iron ore) bear watching.
Base metals now preferred
We prefer base metals over precious metals and bulks, in particular iron ore. Coal prices are seen at the bottom of their trading range, with the question being how long can they stay at current levels. Last downturn saw this last 5 quarters, whereas we are just one quarter into the current downturn. The emergence of economies like India from lockdown are key to coals recovery in our view. We have raised 2020e base metal prices by 10-20% to reflect better than expected Q2 pricing and a tighter supplydemand balance in H2 20e. We have also raised our LT iron ore price to US$60/dmt cfr.
A fair argument but I’m sticking with bulks. The Chinese consumer has not rebounded well and much of the stimulus is still building focused.
As said yesterday, seasonal price performance for iron ore has been very strong. Why would recovering demand hurt it in Q3 as supply is still cut off?