Kumba Iron Ore

Quarterly Update Summary

The recently released Q3 update released by Kumba Iron ore exceeded market expectations with production having increased by a staggering 33% quarter on quarter (q/q). The improved output was led by its Sishen operations which see’s recent restructuring equating to improved operational efficiencies and in turn a 46.5% increase in production (q/q) at the mine.

Total sales over the period grew 14.3% q/q despite a 24% contraction in sales domestically, as export sales (which makes up the bulk of total sales) managed to increase 18.5%.

While the quarter’s production and sales for the period was good on a relative basis, markets will be concerned about the sustainability of the recent run in the underlying price of iron ore.  Iron ore supplies continue to rise while the steel making ingredient faces lower output in the world’s largest (by far) consumer of the base metal. 

Broker View

In terms of a longer term outlook, a Thompsons Reuters poll of 16 analysts have an average rating of sell on Kumba Iron Ore.  

Among investment houses with a sell rating on Kumba are SBG Securities with a target price of 10100c and Deutsche Bank with a long term target price of 7300c.

Technical View

Short term gains in the share price of Kumba Iron Ore see the share starting to test overbought territory. The solid red lines highlight the move up as resembling a rising wedge formation. The rising wedge formation is suggestive of a slow move up after an aggressive move down, alluding to the momentum as remaining bearish. A break of the lower trend line of the wedge would call for 12200 as a favoured downside support target, a break of which would further favour 11300 as the next level of support. 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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