The same analysts that were forecasting iron ore to stay below $100 for the last 2 years are forecasting it to sit between $60-90 per tonne.
CHina's demand for iron ore will increase by 50-60mtpa for the next 30 years, hitting 1 billion tonnes per year by 2020. This excludes India's demand for iron ore which is expected to double, forcing India to continue to hoard iron ore and ban the export of it, further resticting supply.
Quality of DSO hematite from the Pilbara has been falling for the last decade. RIO and BHP are aware of this hence their desparation to diversify their iron ore resource, so RIO has invested in Guinea and BHP is broadening their revenue base to fertiliser.
The demand for iron ore will continue to grow, at a time when high quality large scale (over 100mtpa) mines are deteriorating, providing the international seabourne price of iron ore to remain elevated for the next 3-5 years. It may peak and trough to above and below my ave $$$ per tonne based on cyclical movements in the world economy but it will continue to ave the $120-150 per tonne level at 63.5 % Fe over the 4 to 5 year period.
Providing SDL with an exceptional resource and business model.
SDL Price at posting:
25.0¢ Sentiment: LT Buy Disclosure: Held
