Citigroup: Iron ore prices are expected to soar to $100 in mid-year supply shortages
Citigroup expects iron ore prices to rise to $100 a tonne as supply shortages approach in the middle of the year, noting that the impact of the market on Valley output cuts has not been fully digested.
Analyst Tracy Xian Liao and others wrote in the report that Vale suspended part of its operations after the dam break, resulting in a loss of about 4% in global iron ore market supply, and that this part of production is hard to replace.
In addition, iron ore prices have risen sharply as China's steel production increases and steel companies replenish their stocks after they reduce.
"Assuming that China's steel demand will grow by 1% in 2019, we expect a shortage of supply by mid-year as the current de-inventory draws to a close," analysts said, suggesting investors continue to bullish on iron ore. "Any recent drop in iron ore prices is an opportunity to build up multiple warehouses."
In the past month after Brazil's dam-break, Vale cut production sharply, the iron ore market was hit hard, the benchmark iron ore price soared to $90, and then reversed some of the gains.
Investors are also weighing the impact on the supply of iron ore by sea, as major mining companies such as Rio Tinto and BHP Billiton say they cannot increase production in the short term.