A couple of articles in The Weekend Australian re Iron ore and suitability for investment.
On the one hand we have this:
(Charlie Aitken of Bell Potter)... is recommending that Bell Potter clients first "buy some BHP, secondly buy a pure play iron ore stock, and thirdly buy a decent bottle of red to open in three years' time when you've made plenty of money".
Aitken was quoted last week as saying how he doesn't trust/like Rio under current management, because of previous poor management decisions. But he does like iron ore.
On the other hand we have this:
(Dion Hershan of Goldman Sachs) says: "We continue to have a cautious stance on resources. We have reservations around demand trends both into China and outside of China, and for some commodities in particular we have concerns that there will be a lot of supply growth and that will influence prices, most notably in the iron ore market. Resource stocks and commodity prices have sold off in anticipation of some of these trends, but we still don't feel that it represents the most attractive segment in the market."
and this:
(John Campbell of Avoca Investment Management) says that: "... the resource side of the equation remains troubling fro us. We feel, with China maturing, that the spikes in commodity prices that we saw in years gone by (are not) going to be around going forward and that we are in for a much more normalised commodity price environment. It will be a more difficult environment for resource companies"
and this:
(Roger Montgomery writing in The Weekend Australian): "... China's steel production capacity for this year is a record 900 million tonnes, incluing 80 million tonnes of new capacity added last year... Chinese domestic demand... is expected to hit 750 million tonnes by 2015 (so) a lot of inexpensive steel needs to be pushed to the export markets... China's waning steel demand, coupled with its chronic oversupply, has driven Chinese exports of the metal to the highest level in more than three years... Oversupply is a problem facing the global steel industry, and the rising tide of steel exports has already precipitated a volley of complaints from other countries preparing possible trade action against China... as steel prices remain under pressure, I believe it is logical to expect iron ore prices to follow."
