Iron ore prices rebounded sharply

As iron ore giants such as BHP Billiton revealed last week that they will slow down the pace of iron ore business expansion, the market is expected to ease the iron ore supply surplus is expected to ease, iron ore prices rebounded 11% last week to $ 57.81 per ton Last Wednesday also hit a 5.9% increase in the biggest single gain since October 2012. Iron ore prices have rebounded sharply by 20% since the price of iron ore fell from April 2 to the recent bottom of $47.08 per ton.

Giants expand or slow down

BHP Billiton announced last week that it plans to postpone the expansion of its iron ore production in 2017. BHP Billiton stated that its plan to reconstruct the Port of Henderson Port of Australia with a scale of 600 million U.S. dollars will be postponed. The port, as the world's largest bulk commodity distribution center, means that BHP Billiton will not be able to achieve its target of 290 million tons in 2017. However, BHP Billiton also said that due to the Australian mine's expansion measures, iron ore production in the March quarter rose 20% over the same period last year to 58.9 million tons.

Analysts pointed out that in recent years, iron ore giants Rio Tinto, BHP Billiton and other international mining giants increased production, iron ore prices have dropped to below 50 US dollars per ton. The main purpose is to try to take the opportunity to expand market share in the face of sluggish demand, and squeeze out the more expensive small miners. However, BHP Billiton's move indicates that the giant's continued expansion may slow down and support iron ore prices.

Vale said last week that its first quarter production of iron ore, nickel and other commodities hit the company's record. Vale’s share price on the US stock market rose by 11.24% to US$7.92 last Friday. The cumulative increase for the entire week was 36%, and the weekly gains hit a 16-year high. According to industry insiders, after Vale's record production, it may slow down its expansion in the future. Analysts from Sao Paulo Capital said that Vale’s stock price is responding strongly to the rebound in iron ore prices and that most of the company’s costs are fixed. Whenever the price of iron ore rises, it will have a direct impact on its profits. However, the pace of the company's expansion of production may slow down, because its current output is already very high.

Institutional perspective

Despite recent rebounds in iron ore prices, several well-known investment banks are still cautious about iron ore prices, and it is generally believed that there will be no sustained recovery in iron ore prices.

Barclays is expected to be relatively optimistic. It expects the average iron ore price in 2015 to be US$56/ton, which is still slightly lower than the current price. UBS believes that the average price of iron ore in 2015 will be approximately US$50 per ton. Citigroup is relatively pessimistic. Its average price of iron ore is expected to be only 37 US dollars per ton in the second half of this year, and it will not be able to recover to around 40 US dollars per ton until 2019.

Bloomberg analysts pointed out that even if the oversupply situation has eased, but the lack of demand is still an objective reality. Some economies are not optimistic about the economic outlook this year, and the demand for iron ore in relevant industries is difficult to rebound. This also determines the The recent rebound of iron ore may only be a periodic and short-term market.