Analysts Goldman Sachs is bullish on coal, iron ore Monday, 05 September 2011
GOLDMAN Sachs has lifted its price forecasts for iron ore and coking coal, Australia's two biggest exports, despite growing concern about the health of the global economy.
Goldman yesterday said demand from China and other emerging markets was "holding up well", pointing to a bright outlook for the bulk commodities . "This is important because, even with raw materials consumption in developed economies still below pre-GFC levels, the growth in consumption in emerging markets means that for most major commodities new global records of offtake will be set this year," analyst Malcolm Southwood said.
"Commodities that are supply constrained should remain attractively priced, and for some of them, further upside looks likely."
Rio Tinto this week predicted iron ore demand would outstrip the existing production of Australia and Brazil within eight years. This, and expectations of continued high prices, has sparked a multi-billion-dollar ramp-up of operations in Western Australia's Pilbara region by BHP Billiton, Rio and Fortescue Metals Group, driving up wages and other costs.
Miners last month noted cost inflation, but Mr Southwood said this raised the "support levels" for commodity prices. Growing fears about Europe's debt crisis and the US economy, which shook stockmarkets last month, had prompted the US Federal Reserve to pledge to hold interest rates near zero and hint at more stimulus, he said.
This had hurt the US dollar but supported commodity prices, Mr Southwood said. The trends would also help gold to trade between $US1725 and $US2100 an ounce in the next 12 months, Goldman said. Gold traded at $US1831 an ounce yesterday.
Goldman lifted its price forecast for Pilbara iron ore "fines" for calendar 2013 by 33.3 per cent to $US160 per tonne, and by 32 per cent to $US125 for 2014, on its "growing confidence" market tightness would persist, but held its 2015 forecast at $US95, reflecting its view of lower long-term prices.
Goldman also upped its forecasts for hard coking coal, semi-soft coal and pulverised coal in 2013 and 2014 by 8.6 per cent, but left thermal coal, copper and oil roughly unchanged.