UBS sees iron ore head for a retreat next year
IRON ore was probably heading for a retreat next year as new mine supply came online and a surplus built, according to UBS Group, which acknowledged that the commodity’s recent surge was unexpected and had torpedoed a forecast for a slump this quarter.
“It’s just surprised me,” Wayne Gordon, executive director for commodities and foreign exchange at the bank’s wealth-management unit, said in an interview in Singapore yesterday.
In early October, Gordon told Bloomberg Television the final two months of the year might mark a “death knell” for the raw material as stockpiles climbed. “Iron ore is weird because the inventories are very high in China and it’s got to be pure spec flows,” he said.
The raw material has doubled since bottoming 12 months ago on growing optimism that demand would remain steady in China and rising speculative interest.
The advance, which has persisted even as China’s exchanges sought to curb investors’ enthusiasm, has wrong-footed analysts as well as miners. This week, Barry Fitzgerald, the chief executive of Australia’s Roy Hill Holdings, said every time he made a price forecast, he got it wrong.
“We’ve had a tough year in 2016,” said Gordon, who now sees the price back down at about $60 (R811) a ton in six months. “The market’s been balanced, if not in a slight deficit for iron ore, which is remarkable because we had that massive surplus the previous year. But next year, you’ll start to see that building up with a surplus again.”
Ore with 62percent content delivered to Qingdao advanced to $79.73 a dry ton on Tuesday, near the level of $80.83 hit on