What follows is an excerpt from Canaccord Wealth Management’sMorning Coffee report.
A Caixin report citing a China Ministry of Railways (MOR) official indicates that China plans a 5,400-kilometre expansion of the country’s rail network in 2013.
To put it in context, according to Phat Dragon, if completed that would represent the third largest incremental increase in China’s rail network on record behind the stimulus years of 2009 and 2010.
Phat Dragon said, “with the consolidation of transport investment a crucial cog in the infrastructure led rebound to date, and outlays on utilities capex coming in way below expectations in late 2012, it is heartening that the MOR is firmly signaling “all aboard.’’
Shouldn’t this be bullish for iron ore?
Last week, the iron ore spot price traded up to $148.6 per tonne, that’s down slightly from the multi-year high of $158.9 [reached] on January 9.
Folha de Sao Paulo (via mining.com) reported that Vale SA’s (NYSE: VALE, Stock Forum) executive director for iron ore and strategy, Jose Carlos Martins, expects the “high volatility” in prices seen in 2012 will continue this year.
Martins expects iron ore to bounce between $110-180 per tonne, with a bias to the lower end of the range.
Meanwhile, Deutsche Bank AG (NYSE: DB, Stock Forum) says iron ore prices should rally to $170 per tonne in the first half of 2013 before falling to less than $120.