Experts Agree: The Iron Ore Rally Cannot Last

The analyst community is absolutely dumbfounded by iron ore’s 19% rally yesterday and have come up with a half dozen reason as to why it happened. One of them had to do with a flower exhibition in a busy steel district in China. I kid you not.

The easy and short answer is short squeeze.

Regardless, experts agree everywhere, worldwide, that this shit right here isn’t going to last.

For Goldman, iron ore’s rally “will likely prove temporary,” the bank said in a note that maintained an end-of-year target of $35 a ton, while Citigroup said it’s still bearish and Axiom Capital Management Inc. said the jump was probably just a blip. BHP Billiton Ltd. added to the chorus, saying the advance didn’t change its mid- to long-term outlook.

“There’s clearly what you would describe as an extreme short-covering event going on,” said Wayne Gordon, executive director for commodities and forex at UBS Wealth Management. “The rally is there to be sold because the fundamentals of the market, being supply and demand, do not stack up.”

Australia’s Roy Hill holdings Pty, the venture backed by billionaire Gina Rinehart that’s ramping up output from a new mine in the ore-rich Pilbara to produce 55 million tons a year, was also cautious. While the spike was an unexpected but welcome surprise, “the consensus, if you look at the forward estimates is down, $30s, $40s,” Chief Executive Officer Barry Fitzgerald told reporters. “We expect it to be somewhere there