As usual, the big analysts have got it wrong, again (does...

As usual, the big analysts have got it wrong, again (does anybody actually listen to them anymore? It seems so, to later regret!). Iron ore prices were meant to trend down from now till 2016 and beyond on the basis of oversupply and lowering demand. Well, over supply isn't, with under 20% of announced capacity in 2008/2010 coming on stream. In the period 2010/2012 only about 30% has materialised. As an aside, did you see the OPEX announced for London Mining's Marampa iron mine? $97/t net of shipping! The promised low cost iron from Africa just isn't happening, as a number of observers in the know warned. Few listened then, perhaps they will now?
On the demand side, China is powering along at 7.2 to 7.5% GDP growth. I say powering because 7.2% growth today is, in absolute terms, larger than the 12 to 14% experienced in 2006/2007. That is, 7.2% growth today generates more iron demand than 14% did in 2006. So, we see iron prices increasing now, a totally predictable trend (obvious to blind Freddy but not, apparently, to the likes of MS, or CS). This is the reason companies like ROY, CAP, IRD, IFE, etc have not thrown in the towel on magnetite. In general, these companies are better informed, if only slightly, than the general public. You might hold shares in one or two and won't be in the poor house if they fail (least I hope not). To them, however, it's their life, so they have got to get it right.

We are seeing cautious optimism return to the market, albeit very tentatively. As iron climbs above US$130/t expect to see ROY's share price to appreciate more (it has gained over 50% in the last two-odd weeks). However, also expect the iron price to exhibit high volatility as an increasing market in iron derivatives makes its mark.