Analysts have lifted their forecasts for iron ore prices after a recent surge took the price of 62% Fe fines above $100/mt CFR for the first time in five years due largely to the supply shortfall from Brazil.
Most analysts now expect iron ore prices to average $82-$92/mt CFR over the balance of 2019. S&P Global Platts assessed 62% Fe fines at $102.45/dry mt on Thursday.
RBC Capital Markets described the price increases over the past five months as "exceptional" in a research note Friday. The Canadian bank has lifted its iron ore forecast by 24% to $82/mt.
Goldman Sachs said Chinese steel consumption has surprised on the upside, while Vale's production has surprised on the downside. China's crude steel production of 314.6 million mt over January-April was up 10% compared with the same period last year, National Bureau of Statistics data shows.
Goldman Sachs lifted its iron ore price forecast by 12% to $91/mt.
Goldman Sachs and RBC both noted that the iron ore market is probably at its peak in terms of supply tightness.
RBC expected that owing to strong Chinese demand, there will be a deficit of some 83 million mt of iron ore this year, followed by a surplus of 55 million mt in 2020. RBC predicts that prices in 2020 will average $65/mt.
Commonwealth Bank of Australia lifted its 2019 price forecast by 7% to $92/mt, noting that port stocks were in "freefall".
"The lag between the fall in port stockpiles and Vale's dam disaster in late-January reflects the time to ship ore from Brazil to China (approximately 50 days) and Vale's effort to deplete any existing stockpiles," CBA said Friday.
National Australia Bank lifted its iron ore price forecast for this year to $86/mt, 5% higher than the forecast it gave a month earlier. It sees prices averaging $72/mt next year.
"There remains some uncertainty around the resumption of Brazilian supply -- with Vale suggesting that around half of the shuttered capacity could resume within a year, while some would be offline for two to three years," NAB said.
Source: S&P Platts