A head-spinning 24 hours in iron ore may only be the start, with investors warned to expect more volatility in the market for Australia’s biggest export.
An early morning panic in response to an unprecedented plunge in the iron ore price yesterday transformed into a surprise rally for Australian iron ore miners as Chinese markets rebounded.
Yesterday had been shaping up as a bloody day for Australia’s iron ore sector following an 11 per cent plunge in the spot iron ore price to just $US44.10 a tonne. Both the closing price and the scale of the fall were the worst seen since the introduction of spot prices in 2009.
But a rally in Chinese markets and a rise in iron ore futures helped Australia’s miners not only recover early losses but, in many cases, close the day higher.
Fortescue Metals Group, having hit a six-year low earlier this week, was the biggest winner with a 6.6 per cent jump to $1.785.
Iron ore giants BHP Billiton and Rio Tinto gained 1.8 per cent and 1.7 per cent respectively, while junior producer BC Iron gained 1.8 per cent.
Wood Mackenzie iron ore analyst Andrew Hodge told The Australian that the moves this week were similar to the “snowball effect” in May that saw prices fall “further than we thought was sustainable”.
“Similarly there have been some indications of weak demand, which is normally expected at this time, and this could be what’s driving the underlying weakening sentiment to produce another snowball effect,” he said.
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