The iron ore price has soared to its highest point in almost six months, pushing past its previous August peak as investors hope for an improvement in Chinese demand.
Iron ore gained 1.8 per cent to $US62.70 a tonne overnight, according to The Steel Index, compared to $US61.60 the previous day. Dalian iron ore futures also pushed higher.
After either gaining or holding steady for 13 sessions in a row, the commodity is now at its highest level since April 29, when it spiked to $US65.20.
Iron ore is also following a rally in coking coal, which has gained 25 per cent over the month of October, with steel producers relying on both commodities.
The rally comes as major producers’ shipment forecasts fall at the same time as hopes for strong demand from China are high.
Pure-play miner Fortescue Metals Group this week said the market had come into balance, with low cost seaborne ore displacing Chinese domestic production. But Vale reduced its production guidance and Rio Tinto lowered its shipments forecast.
But the gains were not enough to buoy Australia’s mining giants in London trade. Investors pushed shares in BHP Billiton 1.7 per cent lower, while Rio lost 0.2 per cent, which could indicate some scepticism on the part of equity investors.
Analysts at Citi are among those who doubt the recent run of gains can last.
After undertaking a Fortescue site visit, Citi analysts said there was still potential for the miner to cut some costs and eke out production gains.
“But we expect these to be offset by external cost factors and lower iron ore prices, driving our sell rating,” Citi said in a research note.
Source:The Australian