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Bernstein lifts Q4'18 iron ore shipments forecast

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Bernstein lifts Q4'18 iron ore shipments forecast

Sanford C. Bernstein analysts in a Jan. 3 note raised their iron ore shipments estimate for the fourth quarter of 2018 to 318.1 million tonnes from the previous forecast of 311.4 million tonnes.

The expected volumes represent a 1.4% drop year over year and a 1.7% rise quarter over quarter. The latest and final estimate suggests an end-of-quarter ramp-up in iron ore shipments, the research firm said.

Brazilian mining giant Vale SA is projected to ship 97.2 million tonnes of iron ore in the fourth quarter of 2018, down from 98.2 million tonnes reported in the third quarter of 2018. The company's third-quarter 2018 sales were up 9.2% on a yearly basis and 13.5% on a quarterly basis.

Rio Tinto's iron ore sales volume is seen reaching 87.0 million tonnes in the fourth quarter of 2018. The Anglo-Australian miner sold 81.9 million tonnes of iron ore in the third quarter of 2018, down 4.6% year over year and 7.5% quarter over quarter.

BHP Group Ltd., which reported third-quarter 2018 iron ore sales of 69.4 million tonnes, is set to ship about 67.6 million tonnes in the fourth quarter of 2018. The company's third-quarter 2018 sales were up 9.6% year over year but down 2.8% on a quarterly basis.

Hancock Prospecting Pty. Ltd.'s majority-owned Roy Hill Holdings Pty. Ltd. is predicted to sell 13.1 million tonnes of iron ore in the fourth quarter of 2018. The analysts at Bernstein also provided a forecast for the Australian miner's second-quarter shipments, which are expected to be about 12.7 million tonnes, reflecting a yearly increase of 66.3% and an 11.5% jump on a quarterly basis.

The analysts see iron ore shipments for Anglo American PLC's South African unit reaching 10.5 million tonnes, up from 9.7 million tonnes in the third quarter of 2018. The company's third-quarter 2018 shipments were up 9.2% on a yearly basis and 13.5% over the second quarter of 2018. Due to a suspension at its Minas Rio iron ore operations, the company's Brazilian unit did not ship any metal in the third quarter of 2018.

The company recently announced that operations resumed at Minas Rio following repairs to the pipeline that carries the iron ore in slurry form from the mine to the port. In March 2018, Anglo American was ordered to suspend the mine after multiple pipeline ruptures.

Fortescue Metals Group Ltd. is estimated to ship about 42.6 million tonnes in the last quarter of 2018. The company's third-quarter 2018 shipments were down 8.6% on a yearly basis and 13.5% on a quarterly basis to 40.2 million tonnes.

Meanwhile, the firm said in a separate, same-day note that investors continue to "under-appreciate" investment opportunities in mining. The sentiment was not helped by the escalating trade war in 2018, and the market remains "skittish" on commodity prices and mining equities.

According to Bernstein, the implied sector outlook for this year remains broadly negative. Mining stocks have yet to cover a significant valuation gap that opened up against the wider equity markets in the wake of the end of the commodity "super cycle." Valuations on mining stocks are being affected by negative sentiment around near-term commodity prices and by significant skepticism against the reluctance of miners to ramp up capital expenditure, increase production volumes or conduct M&A.

"Some of this is undoubtedly a matter of time. After all, it has not been all that long that miners have been back in a healthy position where significant growth or M&A has even been a viable option," the report said.