Iron ore, the key ingredient in steelmaking and key source of profits for leading mining houses, has hit $50 a tonne for the first time in four months, boosted by rising steel prices in China.
Benchmark Australian ore for immediate delivery to China was assessed at $50.30 a tonne on Monday, up $3.30, by the Steel Index, a move that boosted shares in BHP Billiton and Rio Tinto, two of the world’s biggest producers. They both rose 9 per cent, while Anglo American — another large supplier — gained 10 per cent.
Iron ore has now climbed more than 17 per cent this year and 35 per cent from its December low, as Chinese steel mills have started to replenish stocks.
The rebound has wrongfooted many analysts and traders who expected iron ore to remain at or below $40 a tonne for the foreseeable future because of abundant supplies and slowing demand from China, the world’s biggest steelmaker and consumer of iron ore.
The reason for its unexpected resilience has been firmer steel prices in China as mills and traders are reporting a moderately better outlook for the country’s construction and infrastructure markets, according to analysts at Morgan Stanley.
Chinese steel mills have also been restocking ahead of the peak production season in the spring and early summer. The steel product, which is most widely used in construction, on Monday closed at its highest level since September.
At the same time, the peak of the production surge has now passed, with the three big Australian producers — BHP, Fortescue Metals Group and Rio — all operating close to full capacity, Morgan Stanley said.
Source: FT