Macquarie reaffirms outlook for iron ore miners, queries Vale's...

Macquarie reaffirms outlook for iron ore miners, queries Vale's targets

Luke Housego

Macquarie has reaffirmed its upbeat view of Australia's iron ore miners.

While shares in the commodity class have eased today, prices for the steel-making ingredient remain elevated, which Macquarie said will continue to provide strong cash returns for exporters.

The investment bank's analysts also questioned whether Brazil's Vale will see operations sustained at the levels required to achieve guidance.

"Total Vale shipments were up 48 per cent week-on-week to 6.4 million tonnes on an increase across all systems," Macquarie said.

"While this level shipping is in line with volumes needed to achieve guidance, Vale has not been able to ship at these levels in consecutive weeks for the year-to-date.

Reduced shipments from Vale and demand from China have seen prices for iron ore rise. Bloomberg

The South American exporter has reiterated it calendar year production guidance of 310 million tonnes to 330 million tonnes.

But with production in the six months to the end of June at 127 million tonnes, the miner needs to hit a run rate of 365 million tonnes to 405 million tonnes p.a. in the December half year to achieve guidance.

"We note that our shipping data suggest Vale’s shipment run-rate in July is about 283 million tonnes per annum," Macquarie explained.

The investment bank's analysts prefer Fortescue Metal Group out of the three Australian majors.

Shares in the company are down 0.8 per cent at $16.75 today after setting another record high yesterday.