Iron-ore rally likely to fizzle - HSBC

In the view of the HSBC’s Metals and Mining Equities team, the recent upsurge in iron-ore prices is unsustainable and likely to fizzle out in the coming months.

Key Quotes (via Business Insider):

“We think spot prices in the high $80 a tonne region look unsustainable.

In the short term, we expect prices to pull back towards $75 a tonne where there is seasonal support. The main risk to this view is that uncertainty regarding further disruptions at Vale from potential government intervention may keep prices elevated

However, we believe further price pressure from slowing steel production, contracting steel margins and recovering supply is likely to see prices trend towards our $67 a tonne average price forecast for 2019 as supportive factors wane.

In our view, the pellet market faces a more meaningful disruption, with 11 million tonnes of production, or 9% of the seaborne market, suspended.

Premiums have risen around $10 a tonne in response,and with no immediate replacement on the horizon, we see this as more sustainable than benchmark iron ore prices.”