Replies to post #6662 on The Rising Influence of Rising Affluence

[jbog]

It'll be interesting to see the IO market play out over the next few years. This year, even if demand is as robust as estimated (+8% vs +4.8% last year) supply will have caught up with demand (-4% currently) by the end of the year. Starting next year suppy will start to overtake demand and they'll be 20% excess supply compared to demand within 4 years.

That means the high cost producers will be selling at a loss. So much for the IO market.

This shouldn't be surprising because we've seen the same senerio many times before. Freeport-McMoRan, Potash and Enron come to mind.

[DewDiligence]

GS analyst lowers price target on CLF from $24 to $20:

http://www.reuters.com/article/2013/03/19/us-cliffs-shares-pricecut-idUSBRE92I0Z720130319

[GS] lowered its 2013 to 2015 price forecasts for iron ore by an average of 8 percent, prompting mining analyst Sal Tharani to lower his price target on shares of Cleveland-based Cliffs to $20 from $24.

…"We believe that market sentiment on the stock will remain negative until there is clarity on how the Bloom Lake costs will be brought under control," said Tharani.

…The investment bank now forecasts an average iron ore price of $139 per tonne in 2013, down from an previous estimate of $144 per tonne. Goldman Sachs expects prices to slip to $115 per tonne in 2014 and then to $80 per tonne in 2015.

At this point, the company-specific issues re Bloom Lake are well known and hardly justification for a further downgrade. However, if GS' extremely bearish 2015 forecast for iron-ore prices were to prove accurate, that's a different story. I would take the "over" bet on GS' 2015 number, FWIW.