Iron ore reaches highest in 10 months on China bets – by Jasmine Ng (Australian Financial Review – April 21, 2016)

Bloomberg – Iron ore surged to a 10-month high on resilient demand in China and BHP Billiton’s plan to ease back on supply growth.

Ore with 62 per cent content delivered to Qingdao climbed 3.1 per cent to $US64.77 a tonne on Wednesday, according to Metal Bulletin data. Futures on China’s Dalian Commodity Exchange jumped as much as 4.8 per cent to 454.5 yuan ($US70.30), while the SGX AsiaClear contract rallied as much as 5 per cent to $US60.48, rising for a third day.

Citi estimates the big five iron ore miners have lowered their collective break-even threshold to just $US32.20 a tonne at current spot estimates.

After three years of sliding prices, iron ore advanced in 2016 as China’s steel output rose to a record, policy makers said they’d support growth and the property sector improved. BHP, the world’s biggest miner, and Rio Tinto Group, the next largest, cut their output forecasts this week, adding to bullish signals. The greenback’s slide to a 10-month low has also bolstered sentiment, as dollar-denominated commodities become less expensive in other currencies.

“Higher steel prices have provided a short-term sentiment boost to iron ore,” said Helen Lau, an analyst at Argonaut Securities (Asia) Ltd. The rally may run out of steam as there will still be additional supply from the major producers this year, she said.

BHP said on Wednesday that output from its mines in Western Australia may be 260 million tons this fiscal year, down 4 per cent from its previous guidance, amid disruptions from bad weather and rail network maintenance.

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