Iron ore rally continues but analysts foresee lower prices on weak demand
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Iron ore futures post their second straight weekly gain, led by optimism that top steel producer China is moving to support its faltering economy, which would boost demand prospects.
The most-traded September iron ore (SCO:COM) on China's Dalian Commodity Exchange has jumped more than 7% this week and ended daytime trading Friday +3.4% to 812 yuan/metric ton ($114.03), its best level since April 3.
The benchmark July contract on the Singapore Exchange has surged more than 8% this week, and recently traded +2% at $112.45/metric ton, near the highest mark since April 20.
Potentially relevant stock tickers include (NYSE:BHP), (NYSE:RIO), (NYSE:VALE), (OTCQX:FSUMF), (OTCPK:GLCNF), (OTCPK:GLNCY), (OTCQX:AAUKF), (OTCQX:NGLOY)
The iron ore rally comes despite continued underwhelming demand and signs the seaborne market is well supplied, as data suggests flows from Australia, the world's largest exporter, rose to 78M tons in May, and Brazil, the no. 2 shipper, already reported unprecedented exports for the month of May.
Citigroup lowered its iron ore price forecast for the rest of the year, predicting $90/ton in Q4, saying any stimulus measures from China would be difficult to translate into robust demand.
Also, Goldman Sachs reduced its H2 outlook to $90/ton on expectations for a global surplus and an "increasingly oppressive" global steel demand environment.
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