Iron ore isn’t sticking to the script, at least for the bears. The commodity that was supposed to be weighed down again this year by rising low-cost supply and poor demand has soared 18 percent, establishing a foothold above $50 a metric ton.
The rebound, which means that iron ore has outperformed all the members in the Bloomberg Commodity Index in 2016, has probably been powered by restocking by Chinese mills and some weather-related disruption to shipments from Australia, according to Capital Economics Ltd. These supportive factors may prove temporary, it said.
Iron ore’s upswing has accompanied a revival in the price of other commodities including oil and industrial metals. Glencore Plc Chief Executive Officer Ivan Glasenberg said on Tuesday that raw materials have bottomed, and Australia & New Zealand Banking Group Ltd. said in a report on Thursday that commodity sentiment has turned in the last fortnight, citing gains in both crude and iron ore. Steel prices in China have also climbed.
Iron ore “prices will fall back, maybe before the end of the second quarter,” said Caroline Bain, a London-based commodities economist at Capital Economics. “Chinese steel production could fall quite sharply this year,” while Australian iron output will continue to rise, she said in an e-mail.
Iron ore’s gains this year were supported as a tropical cyclone in January disrupted some shipments from Australia’s Port Hedland, the world’s biggest bulk-export terminal, and as Chinese mills started to ramp up output after February’s Lunar New Year break.
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