The iron ore price has spiked back above the $US70 a tonne level as speculators continue to places bets despite efforts by Chinese exchanges to clamp down on hot money, while the previously bearish Goldman Sachs upgraded near-term forecasts for the commodity.
Iron ore jumped 5.7 per cent to $US73.80 a tonne overnight, according to The Steel Index, from $US69.80 the previous day.
The fresh push higher buoyed Australia’s mining giants in London trade — BHP Billiton shares jumped 4.9 per cent, while Rio Tinto added 3.5 per cent — and could flow through to the local session this morning.
IG chief market strategist Chris Weston said some market participants were linking the price spike to bad weather, which had made it difficult to transport iron ore to steel mills.
“The fact is the Chinese speculator is at the heart of the move, so expect more volatility here,” Mr Weston said.
The jump also follows a price upgrade from the previously bearish analysts at Goldman Sachs, who less than two months ago reaffirmed a 2017 forecast of $US36 a tonne for the commodity.
Goldman hiked its 12-month forecast to $US55 a tonne and, in the interim, offered a rosy three-month estimate of $US65 and a six-month estimate of $US63.
“Steel consumption is more resilient than expected and demand for iron ore is likely to be supported further by incremental restocking across the steel supply chain,” Goldman said in a research note.
“Further, the pace of supply growth has slowed as a result of delayed capital expenditure and operational challenges.”
Last week, Deutsche Bank and Commonwealth Bank also lifted their near-term forecasts as the continued strength in the commodity continues to surprise many observers. The rally has been linked to Chinese stimulus spending, a surge in the price of coking coal and forecasts of lower shipments from major producers.
SOurce:The Australian.com