Credit Suisse making cautious comments on Metals and Mining Sector; Downgrades estiamtes heavily with large cuts to their iron ore and coal forecasts
- Cuts BHP to Underperform from Neutral on expensive valuation, price target cut to £14 from £18
- Cuts AAL.UK to Neutral from Outperform citing balance sheet concerns that will persist untill assets are sold, price target cut to £14 from £16
- Maintains Neutral on RIO, price target cut to £28 from £34
- Maintains Neutral on VED.UK, price target £5
- Maintains Outperform on GLEN.UK, price target £3.2
- Firm thinks iron ore is only part way through (aside short term cyclical improvements) a protracted multi-year downturn due to weak demand (Chinese property) and robust low cost supply. We now forecast - 2% China steel growth in 2015, an iron ore surplus approaching 100 mt (7% of the market) by end 2016 and a 12 month period (H215-H116) of iron ore prices at $45/t
- Firm states that their conversation with producers suggest costs continue to be cut aggressively and we expect the emphasis of production cuts to increasingly move from Chinese domestic producers to global exporters. The potential stickiness of marginal supply makes picking a price floor a challenging task