S&P/ASX 200 Index (ASX: XJO) iron ore shares are all outpacing the benchmark index at the time of writing today.
The big iron ore miners look to be enjoying the tailwinds from a 1.4% overnight bump in the iron ore price, to US$106.55 per tonne.
While the ASX 200 has dipped into the red as we head into the lunch hour on Wednesday, the big miners remain in the green.
At the time of writing:
- BHP Group Ltd (ASX: BHP) shares are up 0.6%
- Rio Tinto Ltd (ASX: RIO) shares are up 0.6%
- Fortescue Metals Group Ltd (ASX: FMG) shares are up 0.2%
The iron price has rebounded from recent lows of US$99 per tonne on 25 May and US$81 per tonne on 1 November.
But in a sobering assessment for investors in the ASX 200 miners, Goldman Sachs foresees a pending global surplus of the industrial metal.
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Why ASX 200 iron ore stocks hope Goldman is wrong
When it comes to global iron ore demand you can't ignore China.
And it's largely China's unexpectedly weak property sector recovery during the highly touted re-opening that caused Goldman's analysts, led by strategist Nicholas Snowdown, to slash their outlook for iron ore prices.
According to The Australian Financial Review, Goldman just cut its forecast for the iron ore price by 18%. With all three of the ASX 200 miners listed above deriving the bulk of their revenue from the steel-making metal, that could throw up some brisk headwinds if the forecast proves correct.
But with Chinese steel demand sharply lower than previously expected, Goldman believes we're set to see the first global surplus of iron ore since 2018. Indeed, Goldman says steel demand in China is down 5% so far this year compared to last year.
And in a worrying outlook for the ASX 200 iron ore giants, the broker expects weak iron ore demand to persist in 2024 resulting in excess supplies.
Goldman's revised iron ore price forecast for the current half-year declined from US$110 per tonne to US$90 per tonne.
The broker's three-month price target was downgraded to US$80 per tonne.
That's some 25% lower than the industrial metal is trading for today.
