Monsters of Rock: Not satisfied with wrecking lithium, GS sledgehammer comes for iron ore
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Goldman, Goldman, Goldman.
The curmudgeonly grinch of the mining sector in recent years has a habit for moving markets, and not always in the right way.
It is hard to forget its blistering and/or blustering take on the lithium market, predicting a massive slowdown in long term prices that seems, on a supply-demand basis, pretty unlikely.
Now it’s iron ore in the cross-hairs, with Goldman Sachs flipping bearish on the mainstay sector of the Aussie economy in quick time.
After cutting its 2023 forecast to US$90/t and issuing a three-month target of US$80/t on the commodity, recently rallying over nine straight sessions from ~US$95/t to ~US$110/t, it’s taken a very dim view on China’s property market rebound.
The heavily indebted Chinese property sector, despite receiving some support from a Chinese Government keen to hit a 5% GDP growth target this year after slumping to multi-decade low of 2.8% in 2022, continues to look weak.
A post-Covid rebound has proven elusive, and GS is now speaking of an “L-shaped recovery”.
“We believe the policy priority is to manage the multi-year slowdown rather than to engineer an upcycle,” analysts from the investment bank said.
What is an L-shaped recovery?
Largely as written, it comes after a steep recession when the economy rebounds slowly, stablising at a low level.
The statement from Goldman had a pronounced impact on iron ore prices yesterday, falling between 3.5 and 5% depending on the index you follow.
62% Fe iron ore futures were paying US$108.50/t on Monday, but lifted slightly back to US$109.50/t in Singapore today.
Other areas of the mining sector were also in struggle town, with coal stock Yancoal (ASX:YAL) down more than 4% and leading a 1.56% drop across the energy stocks today.
Gold miners were also sold off with prices down overnight. High inflation means investors continue to remain concerned about rate hikes and bond yields. When bonds and cash become more expensive it generally does a number on gold, a non-interest bearing competitor as a store of value.
Looking for a bright spot? Look out for anything that glows.
Numerco’s uranium spot price rose to a year-long high of ~US$57/lb yesterday and yellowcake miners charged out of the gate out of the King’s Birthday public holiday.
Paladin Energy (ASX:PDN) was up 9.35% on strong volumes, shaking off the concerns of investors spooked by dispelled reports Namibia’s government could look to take stakes in exiting mines including Paladin’s Langer Heinrich.
Boss Energy (ASX:BOE), which is currently reviving the Honeymoon uranium mine in South Australia was up 3.83%.