Goldman Sachs boosted its iron ore forecasts after better-than-expected demand in China raised prices, but warned that it remains bearish on next year amid prospects for plentiful mine supplies and a worldwide glut.
The three-month forecast was raised to $US70 a tonne from $US55, and the year-end target increased by $US5 to $US60, according to a report from analysts including Yubin Fu and Max Layton received on Thursday. Next year, prices are still expected to drop, it said.
Iron ore has surged in recent weeks to top $US70 a tonne on sustained demand from China, the largest user. Steel mills in the country have benefited from rising product prices and strong profit margins after the government shuttered some capacity, and remaining producers are making record volumes.
That’s helped to absorb increased mine supplies this year from Brazil and Australia, aiding miners including Rio Tinto Group, BHP Billiton and Vale. “The strength in iron ore prices is likely to continue in the short term as strong Chinese steel and iron ore demand from infrastructure and property new starts is complemented by solid growth in global activity ex-China,” the analysts said.
Still, “while we hold a relatively bullish view on iron ore for the second half of 2017, we take a bearish view during 2018.”
For the rest of this article: http://www.afr.com/business/mining/iron-ore/goldman-turns-bullish-on-iron-ore–for-the-moment-20170727-gxkdg5