Iron Ore Market Analysis: Is It Time to Invest or Wait? - Citi Research Insights
Analysts at Citi Research have flagged important factors to consider in the current iron ore market. With the price hovering in the mid-$80s per tonne, investors are wondering if it's time to "catch the falling knife" or wait for further developments.
Positive surprises in recent months, such as decreased scrap usage in steel production and low iron ore inventories at steel mills, have supported demand. However, the lack of anticipated stimulus from China, including a decline in Total Social Financing (TSF) and weak property starts, poses challenges.
Citi suggests monitoring key indicators for a potential market turnaround, including TSF growth trends, property data, and supply disruptions. For iron ore prices to stabilize at $85 per tonne, China would need to see a 6-9% reduction in steel demand from 2023 levels.
Seasonally, iron ore prices typically rally from late September to early October, but any rebound may be limited due to current price levels. Supply from traditional sources like Australia and Brazil remains stable, while non-traditional supply is price-sensitive.
The current price of iron ore is nearing the top end of the cost curve for traditional suppliers, indicating limited downside potential. Inventory levels at Chinese ports are high, but low inventory at steel mills suggests strong demand and potential for future growth.
In conclusion, investors should watch for signs of a positive turnaround in the iron ore market, such as shifts in TSF growth trends and supply disruptions. Understanding these factors can help individuals make informed decisions about their investments and financial future.