International investment bank Goldman Sachs has released a bullish outlook for the iron ore market, predicting average spot prices to hover around $US140 per tonne in 2013.
Goldman Sachs recent positive macroeconomic data from China meant the risks of consensus downgrades to the sector were diminishing.
The iron ore spot price is currently around $125 per tonne.
Goldman Sachs said Chinese imports of iron ore hit record highs in November, while Indian exports remained at a very low level.
Analyst Julian Zhu said the worst was behind the Chinese steel sector, and demand would be driven by stronger infrastructure growth.
“Given the iron ore market will eventually mature I still remain cautious on some of the smaller operators who are embarking on aggressive expansion plans,” Goldman Sachs UK salesman Curtis Reid said.
“While they have more leverage in a strong iron ore price environment, I would generally prefer to remain exposed to the large cap names that are expanding volumes into this window of higher pricing.
“FMG has enough leverage given its balance sheet but its expansion plans remain on track.”