Goldman Sachs Sees Iron Ore Price Dropping Back Below $50

Reuters reported that Goldman Sachs expects iron ore price to head back below $50 per metric tonne as low-cost suppliers in Brazil and Australia continue to expand while steel demand stays low.

As quoted in the market news:

Freight data from terminals in the two biggest shippers showed volumes rose 10 percent in the first half of June compared with the average over the first five months, the bank said in a report dated June 21. The rise will be sustained, allowing inventories in China to recover and sending prices lower again, Goldman said, predicting ore will average $49 a ton in the third quarter and $48 in the final three months.

Iron ore’s been on a roller-coaster ride, sinking to a decade-low in April as surging low-cost output from miners including Rio Tinto Group (ASX:RIO,NYSE:RIO,LSE:RIO) boosted a glut. Tumbling stockpiles in the biggest user, after imports missed expectations, helped to spur gains in April, May and the first two weeks of June. Goldman and Australia & New Zealand Banking Group Ltd. are among banks predicting higher ore prices won’t last, while Rio says further production is planned even as demand growth weakens.

Goldman’s been warning recent gains won’t last for at least six weeks. The bank said on May 11 the advance offered investors an opportunity to bet on renewed declines, and followed that on June 8 saying the rally was on borrowed time.

The cost of shipping ore to China rose 10 to 20 percent since the start of June, signaling increased shipments, Goldman said in the June 21 report. Mills’ profits fell to a five-year low in May as steel and iron ore prices diverged, and negative margins at some steelmakers will reduce output, the bank said.

Click here to read the full Reuters report.