From: http://www.theaustralian.com.au/ ... c4d8659f90ba2da931d
THE iron ore price, which continues to slide and is hovering at five-year lows, has further to fall, according to China experts.
The price of the steelmaking commodity continued its decline overnight, losing another 1.2 per cent to hit a fresh five-year low of $US82.20 a tonne. The commodity has now lost 40 per cent on the year.
Deutsche Bank’s Hong Kong-based analyst, James Kan, has argued that more production needed to be removed from the market before demand and supply of iron ore moved toward equilibrium.
Mr Kan said the Metallurgical Mines’ Association of China recently told the 2014 China iron ore industry summit that ore production cost had decreased 5 to 10 per cent year-on-year, which he said meant that the iron ore price had more room to fall than expected.
“Iron ore is in over supply both globally and in China. However, we have not seen raw ore production declines yet,” he said.
The analyst added that with 100 million tonnes of excess supply still to be squeezed out, he believed that iron ore prices were still facing headwinds and that further high-cost producers would leave the market.
“We still see raw ore output increases this year compared to last,” he said.
“We are waiting for production cuts and believe the cost curve will move further to
the left, and until these gain momentum, the price has further to fall.”
RBC Capital Markets’ analysts outlined the impact of a continued low iron ore price on Australia’s producers.
BHP Billiton, the world’s largest miner, fares the best, while among the juniors BC Iron
and Mount Gibson are supported by robust balance sheets. A flat $US70 a tonne iron ore price though would erode both of those junior companies’ cash buffer.
RBC’s analyst Chris Drew said that for Andrew Forrest’s Fortescue Metals Group, a $US80 a tonne price would see the miner’s existing cash balance of $US2.4 billion fall to negative $US800m by 2016 and gearing increase from the current 49 per cent to 52 per cent by 2016.
He explained though that this cash depletion incorporated the early repayment of $US1.5bn of the unsecured notes, which the investment bank had modelled over 2015 and 2016.
The latest falls followed a revision to pricing estimates from Goldman Sachs, with analysts at the investment bank also suggesting more pain could be in store.
“The price decline has been dramatic, but a weak demand outlook in China and the structural nature of the surplus make a recovery unlikely,”
Goldman analysts Christian Lelong and Amber Cai wrote in a note titled ‘The End of the Iron Age’.
“Lower prices for iron ore and steel are unlikely to boost demand in a material way. Instead, the day when steel production in China will peak gets ever closer.”
Goldman, while retaining its forecast of $US80 a tonne for 2015, reduced its 2016 forecast to $US79, from $US82, and its 2017 outlook to $US78, from $US85.
The one silver lining in the commodity’s retreat this week for local miners has been a similarly large fall in the value of the Australian dollar.
The unit is now trading comfortably below US92c after holding above the US93c mark as the initial falls in the iron price were realised in recent weeks.
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发表于 23-8-2014 19:59:57
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