Iron ore price upgrades for 2021 a surprise

Fresh forecasts of demand growth and renewed fear of supply disruption have combined to trigger a round of remarkable iron ore price upgrades for 2021 just as investors hug the sidelines in the weeks ahead of profit reporting season (reports MiningNews).
5th February 2021
Resources Rising Stars

Fresh forecasts of demand growth and renewed fear of supply disruption have combined to trigger a round of remarkable iron ore price upgrades for 2021 just as investors hug the sidelines in the weeks ahead of profit reporting season (reports MiningNews).

All the big iron ore miners have been sold down since hitting multi-years highs last month, with some of the selling almost certainly the result of profit-taking thanks to a better-than-expected recovery after the COVID-19 collapse early last year.

BHP peaked on the Australian stock exchange at A$47.54 on January 21 before losing 8% to $43.56. Rio Tinto fell further, shedding 13% to $110, while Anglo American and Fortescue Metals have been hardest hit, both losing 17%.

The trend since that sharp sector-wide correction has been up, but not convincingly with investors waiting to see the detail in profit statements that start with BHP's half-year report on February 16, followed by Rio Tinto's full year the next day and Fortescue Metals half-year the day after.

Until a few days ago the common view of some leading investment banks was that mineral prices (and the share prices of the miners) had peaked with declining Chinese steel demand growth likely to see a widespread correction.

Not now. The latest bank research points to a continuation of the recovery which started after the outbreak COVID-19 early last year continuing well into 2021 and perhaps beyond.

Credit Suisse, in what must be one of the biggest adjustments in a bank's commodity price forecasts has upgraded its price tip for iron ore in the current half by 55% from US$110 a tonne to $170/t.

The full year iron ore forecast from the bank is up 43% from $105/t to $150/t with similar upgrades to the price expected price in 2022 (up 45% from $83 to $120) and 2023 (from $63/t to $90/t).

If it was just one bank revising its commodity price forecasts upward the Credit Suisse adjustment might not be that interesting, but it occurred in the same week as revisions by other banks, including UBS and Morgan Stanley.

UBS lifted its iron ore prediction for this year from $110/t to $125/t. Outer years are unchanged, $95/t in 2022 and $85/t in 2023.

Morgan Stanley was less exact in its latest iron ore price forecasts but if conditions are right, which means supply disruption and solid demand, then the mineral could top $200/t this year.

Under Morgan Stanley's "bull case" iron ore could still be trading at $170/t well into 2023 though any significant weakening in Chinese demand could see a contraction to $98/t in the second half of 2021.

Read more at https://www.miningnews.net/bulks/news/1404008/iron-ore-price-upgrades-for-2021-surprise

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