Iron ore, the whipping boy of commodities last year as world supply overwhelmed demand, has clawed its way back above $US50 a metric ton.
Ore with 62 per cent content rallied 6.2 per cent to $US51.52 a dry ton on Monday, the highest level since October 27, according to Metal Bulletin. The commodity has jumped 18 per cent this year after plunging to $US38.30 in December, the lowest in more than six years.
“There is a bit more optimism in the air – a clear contrast to November and December, which had a distinct graveyard atmosphere,” Philip Kirchlechner, Perth-based director at Iron Ore Research Pty, said by email ahead of the figures. While prices were tough to predict, a range of $US45 to $US55 seemed reasonable for the first half, he said.
This year’s recovery contrasts with the 39 per cent drop last year, when surging output from the largest miners including Rio Tinto Group, BHP Billiton and Vale spurred a glut amid shrinking steel demand in China. In 2016, prices have advanced as Chinese mills started to ramp up steel production after February’s Lunar New Year break, while mainland miners have scaled back, lessening competition for seaborne ore.
“One major factor is the exiting of high-cost Chinese ore production,” said Kirchlechner, a former chief iron-ore representative for Rio in Shanghai. “There is some excitement, partly by demand for construction steel. Construction is expected to pick up again as weather improves.”
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