Iron ore rally won’t last: HSBC tips $US39 by 2017 – by Stephen Cauchi (Sydney Morning Post – March 7, 2016)

http://www.smh.com.au/

HSBC is the latest to join a chorus of voices warning that the rally in iron ore prices may be soon be curtailed, with global oversupply and waning demand from China about to kick in. However, oil’s future is looking a bit brighter, with both HSBC and the Royal Bank of Canada tipping higher prices.

Australia’s biggest mineral export was trading at $US53.75 on Monday, up 40.3 per cent from December’s lows of $US38.30 per tonne, and back at levels the mineral was trading at in October. But it remains far below 2011’s levels, which were over $US180.

Investors have been piling back into mining stocks as a result, with pureplay iron ore miner Fortescue more than doubling its price from the year’s lows to close at $3.08 on Monday. It has rocketed 36.9 per cent in the last three trading days alone.

HSBC’s latest global commodities report tips a bleak future for iron ore, with supply outstripping demand in the foreseeable future.

“Iron ore supply has ramped up rapidly in recent years as major projects in Australia and Brazil come on line,” said HSBC.

“The problem, now, is that production is still likely to expand over the rest of the decade as capacity already in Australia and Brazil continues to come on line.” In contrast to the booming supply, however, demand was set to cool.

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