The iron ore price is closer to government forecasts than it has been for weeks, one day before the federal election is held.
The rising price, as well as a broad-based improvement in sentiment, boosted Australia’s mining giants in London trade. BHP Billiton added 3.6 per cent, while Rio Tinto rose 3.5 per cent, and the strong leads could give the stocks a boost when the ASX opens.
Iron ore rose 1.5 per cent to $US54.20 a tonne overnight, according to The Steel Index, compared with $US53.40 the previous day. The last time the price was higher was on May 19, when it settled at $US55.70.
Meanwhile, the Metal Bulletin price for iron ore printed at $US55.66 overnight, already higher than the government’s prediction of $US55 a tonne that was given in the May budget.
Budget documents suggested that for every $US10 a tonne movement in the iron ore price, tax receipts would increase or decrease $1.4 billion.
The commodity has spent much of the two months since the Budget was released trading below official projections, so any sustained increase in the price would be welcome news for the party that wins government on Saturday.
But a number of investment banks have recently updated forecasts for the key export, with estimates ranging between the low $US40s and the low $US50s over this year and next.
Aside from the moves in commodities, the falling British pound is set to be a positive for London-listed mining companies, according to Hong Kong-based broker Haitong.
The pound plunged more than 10 per cent after Britain’s surprise decision to exit the EU and its rebound has been muted. A weaker pound would make it cheaper for foreign buyers to buy mining stocks priced in sterling.
Haitong raised its rating on BHP to buy from neutral, adding that commodities markets were in “reasonable shape”, Bloomberg reported. The broker also upgraded Anglo American, Glencore and Antofagasta.
Source: The Australian