May as well throw some darts with some percentage on the dart board to determine if it is a 20%, 30%, 40%, etc drop . These high priced guru's at the research Institutes, brokerage firms really have no idea what will happen :)
April 17 (Reuters) - Global miners and steel firms arelocked in annual talks to settle iron ore term prices for theyear starting April 1 and analysts are lowering their priceforecasts as a slowing global economy is set to cut steeloutput sharply.
Following are some forecasts of iron ore price changes for2009/10 recently announced by brokerages (in percentage changefor Australian iron ore fines).
For a poll by Reuters in late January, click [ID:nLN671246]
REVISED FORECAST FORECAST DATE PREVIOUSDaiwa -30 April 16 -25Morgan Stanley -40 April 1 -35Merrill Lynch -30 March 30 -20Deutsche Bank -40 March 27 -30Macquarie -35 March 17 -30Goldman Sachs JBWere -40 March 17 -30
COMMENTARY:
DAIWA INSTITUTE OF RESEARCH
"We still do not foresee a retreat of 40-50 percent year onyear, the range requested by Chinese steelmakers... Iron oresuppliers showed willingness to compromise, as witnessed by thefact that Rio Tinto proposed a 20 percent drop in temporaryprices.
"Nevertheless, we believe there is still a rift between thetwo parties. If iron ore spot prices, which are showing signsof bottoming, rebound, both parties may compromise partlybecause the new fiscal year has already started."
MORGAN STANLEY
"The outlook for the iron ore market continues todeteriorate amid a sharp collapse in global economic growth andrepeated delays in implementing government stimulus packages.
"We now expect a 2009 supply surplus of 47 million tonnes,up sharply from our previous estimate of 16 million tonnes...Barring a more aggressive supply response than we have modeled,world iron ore output this year will exceed total demand by 6percent: this should drive a substantial price decline."
MERRILL LYNCH
"We forecast a 30 percent drop, mainly because we expectthe majors to delay projects and reduce production supply inorder to support product prices. The market is more bearish ata 50 percent cut, which would take prices to below 2007/08levels."
"It would probably require a cut of more than 50 percent tobegin troubling the producers ... So likely range of contractprice outcomes for these negotiations is 30-70 percent declineyear on year."
DEUTSCHE BANK
"Against the backdrop of plunging global steel production,producer curtailments, and a moribund spot price, the Chinesewill take the price down closer to 2007 levels."
MACQUARIE
"This (lowered forecast) reflects the reality of anoversupplied iron ore market and a 2009 steel marketsubstantially weaker than we had previously thought.
"Our forecasts assume that prices do not fully roll back to2007 levels...This is due to the fact that the major producershave taken steps to quickly adjust supply with demand and alsodue to a sharp downward adjustment in domestically-producediron ore in China."
GOLDMAN SACHS JBWERE:
"Global seaborne trade in iron ore is expected to contractby almost 70 million tonnes this year, with all major iron oreimporting regions (with the notable exception of China)expected to register large double digit percentage falls incrude steel production.
"We believe the major contract suppliers of iron ore willeventually be forced to concede bigger than previously expectedprice cuts in order to compete with spot suppliers."(Reporting by Miyoung Kim in SEOUL)
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