Goldman Sachs sees ‘clear deficit’ of iron ore, page-3

Goldman Sachs unloaded this bomb on a then falling iron ore market in August, predicting a continuing fall to US$90/t from July to December in a bear move predicated on a flop in Chinese steel output.

That would have left a surplus of some 68Mt, its strategists mused at the time.

And now for the massive about face, given iron ore prices have climbed from a touch over US$100/t for benchmark 62% Fe fines back then to US$127.60/t in Singapore today.

GS now thinks there’s a clear deficit, according to a new report related by CNBC.

The culprit is underperforming supply out of both Australia and Brazil – the latter the larger component with Vale struggling with a failure in the conveyor system at its high grade S11D deposit and lower output in its southern system.

That has seen Goldman lift its iron ore price forecasts for 2023 from US$101/t to US$117/t, with its 2024 expectations up 22% from US$90/t to US$110/t.

Meanwhile iron ore inventories in China domestically are low, spurring demand for seaborne imports and leaving price risk ‘skewed to the upside’.

It’s quite something given how troubled China’s property sector, the traditional growth engine for iron ore prices, has been in 2023.

That outlook appears to be improving from a poor base.

“Iron ore futures gained last week amid signs of improvement in the Chinese property sector,” ANZ Research’s Felix Ryan said.

“Sixteen major cities removed maximum price limits on land auctions, which could help investment. Any improvement would require a substantial restocking of raw materials, with weak margins pushing steel mills to work down the inventory.”