From the UBS China trip:
Talking with iron ore traders, the expectation is for a modest rally in the iron ore price before year end on restocking post the APEC meeting and ahead of the Chinese winter and Australia’s wet season. But it is expected to be modest, perhaps a lift of 3-5 days at the most. Iron ore price seen lower again in 2015 than in 2014 with a print under US$60/dmt cfr likely as property again seen weak in 2015.
And in discussion with Beijing Yun Ye Mining:
…the current selling price is ~RMB660-670/t excluding VAT at the mine gate, and the company is not making cash today. However it does have undistributed net profits on which they can draw, but in essence the strategy is to wait for others to close. Not a lot of options as an SOE with incentives to remain open for employment purposes likely outweighing those of rational economic endeavours.
Prepare for UBS price downgrades!?!
By coincidence, Morgan Stanley is also there:
Quick Comment – Iron Ore: There was some indication of local governments providing subsidies for miners. Various players in the market expect lower iron ore prices (ranging from US$70-75/t) for 2015.
Steel: CISA believes steel demand has peaked. VAT rebates for steel exports (with added boron) are also expected to end – reducing exports. Strong demand from railways and lower iron ore prices are providing some buffer for mills, while rollover of letters of credit might force mills to dump iron ore on the spot market.
Property: Is weak and expected to remain flat over coming years, but not likely to collapse. The recent easing of HPR rules has benefited Tier 1 and 2 cities but not Tier 3 and 4 cities, where inventories remain at elevated levels, in turn affecting pricing.
Property is not going to save iron ore.
Source: Macrobusiness
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