Search: News Price
Home |  Register |  Price Index  |  Publication |  Consultancy |  Data |  Events |  Enquiry |  Language
Mar.29.2024 1USD=7.095RMB
  SteelHome >>Raw Material>>Market Info>>International Dynamics
 
Morgan Stanley Says Vale's Supply Cut No Panacea for Iron Ore

https://en.steelhome.com [SteelHome] 2015-07-14 10:17:56

share to social network site
Iron ore prices, which sank to the lowest level since 2009 last week, will probably remain under pressure after Brazil’s Vale SA announced changes to its production plans and may even extend declines, according to Morgan Stanley.

The world’s biggest producer said on Monday that it would cut about 25 million metric tons of higher-cost supply from this month, while sticking to a full-year output target of 340 million tons. The decisions are a recognition that the market is oversupplied this year and will probably remain in surplus in 2016, according to Executive Director Peter Poppinga.

“This will not lead to higher iron ore prices in the short term -- it could even have the opposite effect,” Morgan Stanley analysts wrote in an e-mailed report. The changes by Vale won’t reduce supply, rather they will add more lower-cost material into the export market, the analysts said.

Benchmark prices are mired in a bear market as Vale and its main Australian competitors -- Rio Tinto Group and BHP Billiton Ltd. -- increase low-cost production even as demand stagnates in China, spurring a glut. Prices have tumbled to a so-called new-normal level, which may persist through to 2020, according to Rio Tinto, which has defended its expansion strategy. Iron ore imports by China shrank in the first six months of the year, underscoring weakening demand growth, data showed on Monday.

Iron ore with 62 percent content delivered to Qingdao rose 0.4 percent to $50.30 a dry ton on Monday, according to daily data from Metal Bulletin Ltd. released before Vale’s announcement. The price sank to $44.59 on Wednesday, the lowest in data going back to May 2009. It’s 29 percent lower this year after slumping 47 percent in 2014 as production increased.

Shares Rally

Vale’s stock rallied 6.6 percent on Monday after Poppinga’s remarks at an industry conference and Australian mining companies followed on Tuesday. BHP advanced 3.1 percent to A$27.23 at 11:15 a.m. in Sydney trading, while Rio rose 3.4 percent and Fortescue Metals Group Ltd. jumped 5.8 percent.

A signal that major suppliers are considering a supply response may offer limited support to iron ore, David Lennox, an analyst at Fat Prophets in Sydney, said by phone. BHP’s announcement in April that it planned to slow scheduled output expansion saw iron ore prices jump 5.9 percent.

“The indication that a big miner is looking at their operations, much like BHP did, could just about give some positive support,” Lennox said.

Mines in China and other high-cost regions will probably continue to make cuts, offsetting some planned expansions of lower-cost supply by the biggest exporters, according to Jefferies Group LLC. Vale’s decision was a response to low prices, analyst Christopher LaFemina, said in a note.

The forecast global “surpluses are shrinking as long as demand in China does not materially weaken,” LaFemina said in the e-mailed note. “The supply problem in iron ore is being solved by low prices.”

Source: Bloomberg
Related News
上海市通信管理局
沪B2-20040629
Copyright© 2004-. SteelHome.com. All Rights Reserved
Shanghai SteelHome Information Technology Co., Ltd    Tel: +86) 021-50585733, 50585358    Fax: 021-50585277