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UPDATE 1-Dalian iron ore gains but bearish mood persists, Goldman cuts forecasts
December 17, 2015 / 7:48 AM / in 2 years

UPDATE 1-Dalian iron ore gains but bearish mood persists, Goldman cuts forecasts

* Goldman says 250 mln T of mines need to shut by 2018
    * Spot iron ore still below $40/tonne
    * Risks remain skewed to the downside - ANZ

 (Updates prices)
    By Manolo Serapio Jr
    MANILA, Dec 17 (Reuters) - Iron ore futures in China edged
up on Thursday after a recent rout that pummelled prices to
record lows, but the bearish sentiment still persists with
Goldman Sachs cutting its price forecasts and warning that more
mine closures are needed.
    The steelmaking commodity has dropped 46 percent this year,
outpacing copper and crude oil, amid a global glut and shrinking
steel demand in top market China.
    Iron ore for May delivery on the Dalian Commodity Exchange
 closed up 0.9 percent at 293 yuan ($45) a tonne,
having touched a record low of 282.50 yuan last week. 
    On the Singapore Exchange, January iron ore slipped
0.6 percent to $37.77 a tonne.
    Some iron ore cargoes were sold to China at slightly higher
prices than last week's spot levels, traders said, although
private offers remained low in a bid to draw buyers.
    Some Chinese mills that have been liquidating iron ore
inventory may have pulled back and the reduction in short-term
supply may have helped prop up prices, said Daniel Hynes, a
commodity strategist with ANZ.
    "For us the risks are still skewed to the downside. We're
seeing continued weakness in the Chinese steel market," said
    Miners need to cut about 250 million tonnes of iron ore
capacity, or 18 percent of current supply, over the next three
years to balance the market, Goldman Sachs said as it lowered
its price forecasts further.
    Goldman slashed its price estimate for 2016 by 13 percent to
$38 per tonne, analysts Christian Lelong and Amber Cai wrote in
the report published on Wednesday. Iron ore will average $35 a
tonne in 2017 and 2018, down 14 percent from earlier forecasts.
    "We expect the pace of mine closures to accelerate in 2016
as producers with negative cash flow struggle to find
alternative sources of funding," the analysts said. 
    Benchmark 62-percent grade iron ore for delivery to China's
Tianjin port .IO62-CNI=SI climbed nearly 2 percent to $38.20 a
tonne on Wednesday, according to The Steel Index (TSI).
    It touched $37 on Friday, the weakest level recorded by TSI
since it began compiling data in 2008. Prior to TSI records and
during the annual pricing era that preceded the spot-based
system, that level was the lowest since 2005.
  Rebar and iron ore prices at 0707 GMT
  Contract                          Last    Change   Pct Change
  SHFE REBAR MAY6                   1677    +14.00        +0.84
  DALIAN IRON ORE DCE DCIO MAY6      293     +2.50        +0.86
  SGX IRON ORE FUTURES JAN         37.77     -0.23        -0.61
  THE STEEL INDEX 62 PCT INDEX      38.2     +0.70        +1.87
  METAL BULLETIN INDEX             39.18     -0.18        -0.46
  Dalian iron ore and Shanghai rebar in yuan/tonne
  Index in dollars/tonne, show close for the previous trading day
 ($1 = 6.4818 Chinese yuan)

 (Reporting by Manolo Serapio Jr.; Editing by Christian

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