China offers iron ore hope, but caution stays
By Ruby Lian and Manolo Serapio Jr, ReutersSHANGHAI/SINGAPORE -- A rally in iron ore prices to five-month highs has spurred optimism a stabilizing economy may help top buyer China absorb rising global supply, prompting some analysts and traders to raise their estimates for the second half of the year.
August 21, 2013, 3:07 pm TWN
But other forecasters stuck to their price projections, convinced the recent upturn would be short-lived and could quickly falter if Chinese steel demand fizzles out during an anticipated peak season that starts next month.
Still, a rosier outlook suggests that the second-biggest shipped commodity after oil will remain a boon to top miners Vale SA, Rio Tinto and BHP Billiton, although prices remain well below record highs near US$200 a ton reached in 2011.
Surprisingly upbeat Chinese trade and factory output data last week pointed to a stabilizing economy after more than two years of slower growth, fuelling hopes steel demand, which has been firm at the start of the second half of the year, could strengthen further.
“We see stronger-than-expected iron ore demand in the second half since mills have to replenish supplies after destocking in the first half,” said Graeme Train, a commodity analyst with Macquarie in Shanghai. “Stronger steel demand will support ore.”
Train sees iron ore at around US$125 to US$130 a ton in the second half, up from a previous forecast of US$120, with the possibility of even stronger prices in the fourth quarter.