Goldman: Iron Ore’s Seasonal Consolidation

Goldman Sachs write “the near 50% rally in the iron ore price over H223 has stalled so far this year. We view this current phase of price action as more a period of seasonal consolidation, than a definitive bearish turn in path.”

• “Whilst the recent deterioration in China’s pig iron and steel production have tapered fundamental tailwinds to price, this is temporary and seasonal in nature rather than sticky.”
• “Much of the maintenance activity at blast furnaces that has weighed on output is now drawing to end over January. Supply disruptions have also tapered some of the recent strength in shipment volume.”
• “We project a near balanced iron ore market this year, with tight mainstream iron ore port stocks and progressive mill restocking ahead of Lunar New Year, limiting the degree of prospective correction ahead.”
• “In this context, on a 3M basis we target limited further downside in the benchmark 62% contract, in-line with current SGX forward curve pricing.”