Iron ore miners in $65bn upswing – Matt Chambers (The Australian – November 07, 2013)

MORE than $65 billion has been added to the value of the nation’s iron ore miners this financial year — $2.3bn of it into Andrew Forrest’s share portfolio — as confidence grows in the strength of prices of Australia’s biggest export.

Iron ore prices remain above $US130 a tonne, outlasting expectations, as Chinese steel mills continue to buy ore and build stockpiles.

But the price increase pales in comparison to the gains of the Australian miners whose revenue depends on the steelmaking ingredient.

Since June 30, the best performing top 200 Australian stocks have been Mount Gibson Iron, up 111 per cent, Arrium, up 93 per cent, and Andrew Forrest’s Fortescue Metals Group, up 92 per cent. In the same period, Australian iron ore prices have risen just 13 per cent, illustrating the surprise around the sustained price strength.

In dollar terms, Rio Tinto and BHP Billiton will be reaping the most benefits, but their size and diversity have diluted the effect on their share prices. Since June 30, BHP is up 21 per cent, or $33bn, and Rio is up 25 per cent, or $21.7bn.

The strength in prices comes as a seasonal pullback in steel production usually seen in September and October remains absent.

“China has been restocking after record levels of iron ore imports over the past few months,” Deutsche Bank strategist Xiao Fu said.

“We expect the pace of restocking could slow. However, we are still below the 2011-12 (inventory) peaks, which suggests that the restocking cycle could last for another two or three months.”

Fortescue, which is 33 per cent-owned by its chairman Mr Forrest, has added $8.7bn to its market value in 2013-14, raising its market capitalisation to $18.2bn and making Mr Forrest’s stake in the company worth $6bn.

Following a visit to Fortescue’s iron ore mines in Western Australia’s Pilbara region last month, UBS analyst Glyn Lawcock yesterday said he believed the shares had further to run.

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