Fortescue Metals Group Limited (ASX: FMG) shares are being tipped as a buy by Goldman Sachs after the powerful research house updated its iron ore price forecasts for the year ahead.
Recently Goldman's commodity team upgraded its iron ore price forecasts for 2019, 2020 and 2021 to an average of US$100 per tonne, US$90 per tonne and US$75 per tonne respectively.
Its more bullish iron ore forecasts are still largely based on an estimate that supply will be short though to 2020 thanks to robust Chinese demand for the key steel-making ingredient.
Goldman's also expects slower supply growth out of major miners such as Fortescue, Rio Tinto Limited (ASX: RIO) and BHP Group Ltd (ASX: BHP).
Over the fourth quarter of 2019 Goldman's is even tipping the iron ore price to hit US$110 – US$115 tonne as Chinese demand strength and supply shortages combine.
As a result it's upgraded its FY 2020 earnings per share forecast for Fortescue by a significant 26% and slapped a $9.80 12-month share price target on it.
If Goldman's is on the money Fortescue shares have some 27% upside over the year ahead.
