Ore price tipped to fall

Pilbara News - - News - Nick Evans

Debt re­pay­ments by Fortes­cue Met­als Group and At­las Iron in the past six months look to be well timed, with an­a­lyst con­sen­sus fore­casts tip­ping steep falls in the iron ore price in com­ing months.

De­spite iron ore stock­piles at Chi­nese ports ap­proach­ing the 120 mil­lion tonne mark, the high­est lev­els seen since 2014, the bench­mark iron ore price ticked up again last week.

Talk of more steel mill clo­sures in China, along with an­a­lyst re­ports that China’s iron ore min­ers did not in­crease pro­duc­tion much in re­sponse to steep com­mod­ity price rises last year, led to sharp rises for iron ore fu­tures on the Dalian ex­change on Jan­uary 11, sug­gest­ing fur­ther ral­lies in the iron ore price this month.

How­ever, while the iron ore mar­ket is no­to­ri­ously dif­fi­cult to an­tic­i­pate, an­a­lyst pre­dic­tions sug­gest price falls are on the way.

The bench­mark iron ore price has not slipped be­low $US60 a tonne since mid-Oc­to­ber.

But the me­dian price of an­a­lyst con­sen­sus es­ti­mates on Bloomberg sug­gests com­mod­ity price tip­pers ex­pect the iron ore price to av­er­age only $US60/t in the first quar­ter of the year, fall­ing to an av­er­age $US55/t in the sec­ond half of the year.

At­las, which has a breakeven op­er­a­tions at a head­line price of just un­der $US50/t, said last week it added $39 mil­lion to its bank bal­ance as prices rose in the De­cem­ber quar­ter.

It said it had cut its debts by $54 mil­lion in the pe­riod, leav­ing $118 mil­lion to re­pay on its US term-loan debt, and ex­pects to have more cash than debt by the mid­dle of the year.

Fortes­cue also slashed a sig­nif­i­cant por­tion of its debt late last year and is now ex­pected to be in a po­si­tion to re­visit its div­i­dend pay­out ra­tio in its half-year fi­nan­cial re­sults, due next month.

Fortes­cue chief Nev Power.

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