Compelling reward/risk ratio, page-122

Goldman Sachs did similar forecast on iron ore in December 2015 while iron ore price bottomed at US$39/ton. GS forecast iron ore price would fall to US$35/t for 2017 and 2018, and the global supply needed to cut 18%, 250 million tons.

BUT, reality was, the lowest iron ore price was US$56.50/ton, the highest iron ore price US$95.50/ton, average was around US$70/ton for 2017 and 2018, it soared to US$124/ton in 2019, and fresh record high of US$229.50/ton in 2021.


Goldman sees more pain for iron ore
PUBLISHED THU, DEC 17 2015
12:34 AM ESTUPDATED THU, DEC 17 20152:47 AM EST
Huileng Tan

There is likely to be more downside, the house added, cutting its price forecast for iron ore to $38 in 2016 – down 13 percent from its previous call of $44.
Goldman tips iron prices to fall to $35 a ton in 2017 and 2018, down 14 percent from its previous prediction of $40.

The downgrade in price forecasts were made to reflect the need to cut 250 million tons, or 18 percent of current supply, of seaborne mining capacity in the next three years.
“The short-term outlook remains exposed to the deteriorating health of the Chinese steel industry. Record export volumes have failed to fully offset a material decline in domestic demand, and operating margins have been under pressure for most of the year,” wrote analysts Christian Lelong and Amber Cai.

They estimate the marginal cost of production for a ton of iron ore to be $35.



The funny thing is, Goldman Sachs now has exactly similar forecast for lithium, says, 17% oversupply, and lowers their lithium price forecast. EVEN after lithium price dropped over 80%!!!

Remember, crude oil dropped below zero, no one wanted it, but it recovered to US$100/ton. In any commodity cycle, over 75% drop, will follow by a over 100% recovery in a short period.


"According to the latest analysis from Goldman Sachs (courtesy of The Australian Financial Review) investors can expect the global lithium market to be in a 202,000 tonne surplus in 2024.
The broker's commodities analysts noted this "represents 17% of global demand". Therefore, they said they "expect prices to trade deeply into the cost curve to balance the market".
According to Goldman's analysts:
In this context, we maintain our bearish view on the lithium market and lower our 12-month target for China Lithium Carbonate (excluding VAT) to US$11,000 a tonne and CME Asia CIF Lithium Hydroxide to US$12,000/t (from US$15,000/t and US$16,500/t respectively previously)."



Always DYOR, all IMO.