Ship loading iron ore at Port Hedland. Photo: Fortescue Metals Group
Iron ore has closed at more than US$50 a tonne for the first time since October 27 this week, after a slight slowdown in iron ore production was met with increased output in the Chinese steelmaking sector.
The commodity, which is vastly important to the Federal Budget, and the national economy, surged to close at US$51.12 on Monday night.
The high comes just a couple of months after iron ore dipped to an eight-year-low US$38.30 a tonne in December 2015.
Iron ore has been on the decline for more than two years now, with supply from the Australian majors, and Brazil’s Vale, flooding the market, while the incredible pace of economic growth in China has shown signs of slowing perhaps to a more realistic rate during the same timeframe.
Analysts have cited slight declines in iron ore exports from some of the majors in recent months, with a minor slowdown in the overall supply-side of the market, contributing to the bounce-back in price.
The rebound lifted the Aussie Dollar by more than 1%, and saw healthy growth in the share price of Rio Tinto, BHP Billiton and Fortescue Metals Group at the start of the week.
It was also welcomed by Budget forecasters in the media, who suggested the price lift could provide Treasurer Scott Morrisson with an unexpected multibillion-dollar boost to revenue at a good time of year to get one.
But the long-term virtue of the price rebound was downplayed by BHP on Tuesday, with the major ASX-listed mining company warning that the market remained volatile, and the decline in prices would most likely persist.
Steelmaker and BHP spin-off business BlueScope Steel also downplayed the price surge.
“[Iron ore] is more likely to go down than to go up, both on the fact of increased supply coming on in the market and on the fact that the whole steel industry globally is struggling to make money,” BlueScope boss Paul O’Malley told investors after the release of Bluescope’s H1 profit report this week, according to Bloomberg. “More mills will close down.”