Iron ore rally is only temporary, Goldman says

|By:, SA News Editor

The recent rally in iron ore is only temporary, and iron ore’s long-term fundamental weaknesses of oversupply and a lack of demand is not likely to change, Goldman Sachs says.

No major producer has revised its long-term production target downwards, Goldman says, also believing that the deferral of capex at BHP Billiton (BHP +0.8%) reflects further gains in efficiency rather than a change in strategy; also, the firm thinks Atlas Iron (OTCPK:AGODY) is the first - and maybe not the last - Tier 2 producer to reverse a mine closure.

Goldman expects iron ore to average $52/metric ton this year and fall to $44 in 2016 and $40 in 2017.

Iron ore producers are higher after the People’s Bank of China again cut interest rates over the weekend: RIO +2.3%, VALE +1.6%.

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