Iron ore seen at RM133 by Clarksons –stockpiles to soar
SINGAPORE: For a clue about where iron ore prices are headed, watch port stockpiles in China.
Holdings will probably extend a rebound from a 19-month low as supply rises, according to Clarksons Platou Securities, the world’s largest shipbroker, which says prices may slump to US$35 (RM133) a metric ton in the second half.
Inventories, at 82.5 million tons last week, may climb to 95 million tons by September, said Australia & New Zealand Banking Group Ltd.
“With our view that Chinese steel production will end the year down year-on-year, it has to go somewhere and port stocks are the logical place,” Jeremy Sussman, a New York-based analyst at Clarksons, said by email.
Iron ore’s been whipsawed this year, tumbling to the lowest level in at least six years this month, as the port holdings sank, then rebounded.
The world’s biggest mining companies including BHP Billiton Ltd. and Vale SA raised output even as demand growth stalled in China, seeking to boost sales and cut costs.
Further increases in low-cost production may cause prices to plunge into the US$30s this year, according to Citigroup Inc.
“Stock levels may start to grow modestly in the months ahead as supply growth accelerates once again but, in a buyers’ market, this is likely to come at the expense of further price declines,” Goldman Sachs Group Inc. said in a report on Monday.
The bank sees iron ore dropping for the next four quarters.
Ore with 62 per cent content delivered to Qingdao rose 2.1 per cent to US$53.45 a dry ton last Tuesday, the highest level in more than three weeks, according to Metal Bulletin Ltd.
Prices sank to US$44.59 on July 8, a record in data going back to May 2009, and are 25 per cent lower this year.
The port inventories contracted from a record 113.7 million tons in July 2014 to a low of 79.4 million tons in June after four quarterly declines, according to weekly data compiled by Shanghai Steelhome Information Technology Co.
The 21 per cent drop in the three months to June helped prices rally 16 per cent.
The principal reason for the port-stockpile buildup is a slowdown in China’s steel demand, according to ANZ analyst Anurag Soin.
Activity will remain weak for the next two months, driving port stockpiles higher, he said in an e-mail.
Steel output in China fell 1.3 per cent in the first half after peaking last year, according to the China Iron & Steel Association.
As apparent consumption dropped 4.7 per cent in the first six months of 2015, more mills were looking for overseas sales, the group said in a statement this week.
“China is focusing on exporting the steel production surplus, which has triggered a series of anti-dumping investigations, posing a risk that this avenue for disposable of surplus steel may slow,” said ANZ’s Soin. — WP-Bloomberg
Stock levels may start to grow modestly in the months ahead as supply growth accelerates once again but, in a buyers’ market, this is likely to come at the expense of further price declines. Goldman Sachs Group Inc.