By Phoebe Sedgman - Mar 7, 2013
Bloomberg
Iron ore is poised to decline over the rest of the year as global supply increases and a rally spurred by restocking in China ends, according to Morgan Stanley.
The price probably peaked at about $159 a ton last month and will average $129 over the rest of the year, analysts Joel Crane and Peter Richardson said in a report. The raw material may average $133 a ton over 2013, with prices seen dropping to $130 in the fourth quarter from $142 in the first, they said.
Iron ore has rallied 68 percent since September as economic growth in China accelerated and port inventories in the biggest buyer slumped to a three-year low. Morgan Stanley joins analysts from Deutsche Bank AG to Bank of America Corp. forecasting lower prices. Global seaborne supply will gain 9.1 percent this year, topping an 8.3 percent rise in demand, Morgan Stanley estimates.
“The latest data points for steel inventories with traders and mills show that stocks have experienced a typical, seasonal rebuild,” the analysts wrote in the report dated today. “The spot iron ore price likely peaked last month.”
Iron ore with 62 percent content delivered to the Chinese port of Tianjin rose 0.4 percent to $145.80 a dry ton yesterday, according to data from The Steel Index Ltd. The price surged to $158.90 a ton on Feb. 20, the most expensive since Oct. 13, 2011. It bottomed at $86.70 on Sept. 5.
‘Suffer a Bit’
Iron ore may drop to $115 a ton by yearend, Deutsche Bank said March 1. The price may tumble to $70 a ton in the three months to September after trading between $130 and $160 through June, Tom Price, a Sydney-based UBS AG analyst, said Feb. 26.
Vale SA (VALE3), the world’s biggest producer, said Feb. 28 that while first-half prices may be better, they “may suffer a bit” in the second because of supply increases, according to Jose Carlos Martins, head of ferrous and strategy. The Rio de Janeiro-based company reported a record quarterly loss that day.
Swaps show expectations for lower prices this year. The March contract was at $145.50 a ton yesterday, with September’s at $124.50 and December’s at $120.75, according to GFI Group Inc.
Prices tend to ease after the first quarter once mills conclude restocking, National Australia Bank Ltd. said in a March 4 report. The so-called temporary factors underlying the recent rally should taper off, causing prices to drop, it said.
Inventories at Chinese ports rose for a second week to 68.9 million tons on March 1, according to data from researcher Beijing Antaike Information Development Co. Stockpiles fell to 66.89 million tons on Feb.1, the lowest level since January 2010, and remain 30 percent lower than a year ago.
“Indicators of iron ore inventory at the ports show stocks remain well below normal levels, which will continue to provide support,” the Morgan Stanley analysts said. “Chinese steel production remains strong, and will grow 2.6 percent.”
Iron ore is measured in dry tons, or metric tons less moisture. At Tianjin port moisture can account for 8 percent to 10 percent of the weight. Australia and Brazil are the world’s two biggest exporters.
Bloomberg
Iron ore is poised to decline over the rest of the year as global supply increases and a rally spurred by restocking in China ends, according to Morgan Stanley.
The price probably peaked at about $159 a ton last month and will average $129 over the rest of the year, analysts Joel Crane and Peter Richardson said in a report. The raw material may average $133 a ton over 2013, with prices seen dropping to $130 in the fourth quarter from $142 in the first, they said.
Iron ore has rallied 68 percent since September as economic growth in China accelerated and port inventories in the biggest buyer slumped to a three-year low. Morgan Stanley joins analysts from Deutsche Bank AG to Bank of America Corp. forecasting lower prices. Global seaborne supply will gain 9.1 percent this year, topping an 8.3 percent rise in demand, Morgan Stanley estimates.
“The latest data points for steel inventories with traders and mills show that stocks have experienced a typical, seasonal rebuild,” the analysts wrote in the report dated today. “The spot iron ore price likely peaked last month.”
Iron ore with 62 percent content delivered to the Chinese port of Tianjin rose 0.4 percent to $145.80 a dry ton yesterday, according to data from The Steel Index Ltd. The price surged to $158.90 a ton on Feb. 20, the most expensive since Oct. 13, 2011. It bottomed at $86.70 on Sept. 5.
‘Suffer a Bit’
Iron ore may drop to $115 a ton by yearend, Deutsche Bank said March 1. The price may tumble to $70 a ton in the three months to September after trading between $130 and $160 through June, Tom Price, a Sydney-based UBS AG analyst, said Feb. 26.
Vale SA (VALE3), the world’s biggest producer, said Feb. 28 that while first-half prices may be better, they “may suffer a bit” in the second because of supply increases, according to Jose Carlos Martins, head of ferrous and strategy. The Rio de Janeiro-based company reported a record quarterly loss that day.
Swaps show expectations for lower prices this year. The March contract was at $145.50 a ton yesterday, with September’s at $124.50 and December’s at $120.75, according to GFI Group Inc.
Prices tend to ease after the first quarter once mills conclude restocking, National Australia Bank Ltd. said in a March 4 report. The so-called temporary factors underlying the recent rally should taper off, causing prices to drop, it said.
Inventories at Chinese ports rose for a second week to 68.9 million tons on March 1, according to data from researcher Beijing Antaike Information Development Co. Stockpiles fell to 66.89 million tons on Feb.1, the lowest level since January 2010, and remain 30 percent lower than a year ago.
“Indicators of iron ore inventory at the ports show stocks remain well below normal levels, which will continue to provide support,” the Morgan Stanley analysts said. “Chinese steel production remains strong, and will grow 2.6 percent.”
Iron ore is measured in dry tons, or metric tons less moisture. At Tianjin port moisture can account for 8 percent to 10 percent of the weight. Australia and Brazil are the world’s two biggest exporters.
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