The iron ore price has edged higher as a forecast for unusually inclement weather off the coast of Western Australia raises the prospect of constrained supply that could boost prices for longer.
Iron ore added 0.4 per cent to $USUS56.80 in the most recent session, according to The Steel Index, from $USUS56.60 the previous day.
The commodity has now chalked up five straight sessions without a fall, after dropping below the key Budget estimate of $US55 a tonne earlier this month and then rebounding.
Even as iron ore continues to defy some analysts’ forecasts of a looming drop into the $USUS40s, Macquarie research points to adverse weather conditions that could keep prices buoyant.
“Australia’s Bureau of Meteorology has forecast a 67 per cent chance of having more than the average 11 tropical cyclones over the 2016/17 season from November to April due to the prevailing weak La Niña conditions in the tropical Pacific Ocean,” Macquarie said in a research note.
“Western Australia is expected to have at least two tropical cyclones to make landfall. Last season was the least active on record, with only one cyclone that hit the WA coast at the end of January.
“Meanwhile the coast of Queensland is forecast to see up to eight cyclones form, with only one or two likely to make landfall.”
The cyclones could have negative implications for iron ore supply from WA, as well as metallurgical coal supply from Queensland, according to Macquarie.
“The first quarter of each year is typically weakest for seaborne supply for both commodities due to wetter weather, and with conditions expected to be more adverse than usual, these markets could stay tighter for longer.”
In London trade, BHP Billiton shares rose 2.1 per cent, while Rio Tinto added 0.8 per cent.
Source: The Australian