Iron ore spot and Chinese dealer steel prices correcting, but further downside limited
While expectations for large-scale steel price hikes are dissipating, we maintain Overweight on the sector as steel shares are trading at the lowest end of the historical P/B, and 3Q19 earnings results should meet expectations.
Iron ore spot price is now moving around USD90/ton after peaking at USD118/ton in July. Price corrections began in 3Q19, a quarter earlier than expected, due to sagging Chinese imports (as a result of the country’s increased iron ore production) and worries about a potential output increase