Goldman Sachs predicts a clear deficit in the iron ore market for the rest of the year due to low inventories, falling production, and fiscal spending in China. Analysts caution against excessive optimism, citing compromised supplies from leading producers Australia and Brazil.
Fiscal Spending Signals Positive Growth Sentiment
Goldman Sachs forecasts a shortfall in the iron ore market due to low inventories and declining production. The recent fiscal spending by Beijing is seen as a positive indicator of domestic growth sentiment, potentially leading to increased demand for iron ore from the construction industry.
Compromised Supplies and Low Inventories Contribute to Deficit
Goldman Sachs attributes the expected deficit in the iron ore market to factors such as compromised supplies from leading producers Australia and Brazil. A recent downward revision in global iron ore supplies reflects underperformance in the Australian and Brazilian supply over Q3, with issues such as a failure in Vale’s S11D conveyor belt and lower production in the Southern System.
Reversal in Forecast and Price Projections
Goldman Sachs has reversed its previous forecast for a surplus in the iron ore market, now expecting a full-year average for the benchmark 62%-grade iron ore to surge from $101 per tonne to $117 in 2023. Analysts anticipate a 22% jump in 2024, with a price forecast of $110 per tonne.