Iron Ore Pricing: Where is the floor?
Citigroup Inc. analyst, Ivan Szpakowski has slashed his iron-ore forecast to average US$65/tonne in 2015.
Ivan is looking at the iron-ore price bottoming in the September 2015 quarter at an average US$60/tonne on the back of renewed supply growth and further demand weakness. About 140 million tonnes of export supply growth is expected in 2015, with the bulk of this coming from Rio, Vale and BHP.
When the Australian Federal Budget deficit of A$30 billion for the 2014/2015 financial year was announced in May, the iron-ore price was above US$100/tonne and few analysts could see it would decline to the current levels.
So far this calendar year, the iron-ore price has declined 44 per cent from US$131/tonne to US$74/tonne. If Ivan is right, there are further declines expected.
As we have previously noted, it is worth remembering that for decades prior to 2004, the price of iron ore traded between just US$10/tonne and US$20/tonne. The price then rallied to $187 in 2011. It has been falling ever since. Today’s experts guessing iron ore’s near term levels are the same people who failed to see the current levels materialising.
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
garry howlett
:
It has been at least 2 years this blog has been warning of the iron ore price falling. Against analyst and broker cries that $100 would be the floor or that China would continue to grow and thus keeping iron ore prices elevated. It has been an interesting time watching it play out.
Great research again, years ahead of some of the competition. Hope there was some money made on the sell side?
Roger Montgomery
:
Hi Garry,
I certainly hope we helped investors consider how they might discuss protecting themselves with their advisors!