THE price of iron ore has risen for the first time in seven trading sessions but the rebound in the beaten-down commodity lacked conviction and will do little to keep the bears quiet.
At the end of the latest offshore session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US68.00 a tonne, up 0.3 per cent from its previous close of $US67.80 a tonne, but just 3 per cent above the five-and-a-half-year low of $US65.70 reached on December 23.
The rare lift in the price came after a six-day slump dragged the commodity down from over $US71 a tonne back to levels below $US68 a tonne.
The commodity remains around 50 per cent below its position at the same time last year as investors continue to worry about an oversupply that has been driven by surging production as demand growth stalls.
Several false dawns in the price of the commodity have led investment banks to lower their expectations for a recovery in the next two years, with several analysts lowering their forecasts this week alone.
Among the most bearish is Citi, which now tips an average price of $US58 a tonne in 2015, down from its previous expectation of $US65 a tonne.
Also expressing doubt about the recovery are Macquarie Group and UBS, with the former revising forecasts about 20 per cent lower this week to $US61.53 a tonne and the latter tipping an average price of $US66 this year.
“Demand growth again looks likely to remain anaemic, outstripped by supply growth from the three majors, Minas-Rio and Roy Hill,” UBS analysts said.
Part of the reasoning for the latest revisions has been the crumbling price of oil, which lowers production costs for iron ore miners and consequently reduces the price at which mining becomes unprofitable.
Source: Business Spectator
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