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14-10-2014, 09:46 PM
Iron ore price in 4pc rebound amid boost in China data
THE AUSTRALIAN OCTOBER 15, 2014 12:00AM
Barry FitzGerald
Resources Editor
Melbourne
Rick Wallace
Journalist
Melbourne
A STRONG rebound in the iron price has turned producers of the steelmaking raw material from market pariahs to darlings in the space of 24 hours.
Iron ore climbed the most in two years, rising $US3.20 or 4 per cent, to $83.10 a tonne in response to improved economic data out of China, the world’s biggest steel producer. The price recovery only returned iron ore to its highest level since September 18, and it is still well short of its starting price for the year of $US135 a tonne.
But the punch back through $US80 a tonne raised expectations of a recovery in prices in the closing months of the year now that China’s holiday season is out of the way, and as closures of high-cost iron ore production in China and elsewhere soaks up the current surplus in supply.
This year’s price plunge saw equity values smashed by more than 70 per cent for higher cost producers. Leading producers Rio Tinto, BHP Billiton and Fortescue also came under price pressure.
But the 4 per cent bounce in the price was enough to fuel big share price recoveries yesterday. Atlas closed up 5.3c or 14 per cent to 42c, Mt Gibson added 8c or 18 per cent to 52.5c and BC Iron rallied 18.2c or 13 per cent to $1.59.
Mt Gibson’s performance was helped by the release of its September quarter report, which showed it was holding cash of $465 million (43c a share) at the end of the period. That was down from $520m at the end of June, but after $30m was spent on mining equipment and tax payments.
Rio’s share price climbed $2.35 or 4 per cent to $60.71, with renewed hopes for iron ore to get back to the $US90-$US100 a tonne to be helpful in its unfolding cold war with spurned suitor, the iron ore-deficient Glencore. BHP added 85c or 2.6 per cent to $33.45 and Fortescue regained 19c or 5.4 per cent to $3.65. Baillieu Holst analyst Adrian Prendergast said the iron ore price rise was the first sign that a seasonal uplift in iron ore demand was under way.
“China is now back online following its week-long national holiday, which typically sees a seasonal improvement in steel production,” he said.
“It is unlikely that the iron ore market will bounce back to previous levels as swiftly as it did in late 2012 during the last material spot price weakness, but we believe that we will see a gradual moderation of recent extreme volatility and that the spot price is more likely to recover gradually back towards a range of $US90-$US100 a tonne heading into 2015,’’ Mr Prendergast said.
Citi has updated its iron ore price forecast to $US87 in the fourth quarter. Japan’s Marubeni, a major stakeholder in Gina Rinehart’s Roy Hill project in WA, also called the bottom of the iron ore slump, saying prices would recover next year.
THE AUSTRALIAN OCTOBER 15, 2014 12:00AM
Barry FitzGerald
Resources Editor
Melbourne
Rick Wallace
Journalist
Melbourne
A STRONG rebound in the iron price has turned producers of the steelmaking raw material from market pariahs to darlings in the space of 24 hours.
Iron ore climbed the most in two years, rising $US3.20 or 4 per cent, to $83.10 a tonne in response to improved economic data out of China, the world’s biggest steel producer. The price recovery only returned iron ore to its highest level since September 18, and it is still well short of its starting price for the year of $US135 a tonne.
But the punch back through $US80 a tonne raised expectations of a recovery in prices in the closing months of the year now that China’s holiday season is out of the way, and as closures of high-cost iron ore production in China and elsewhere soaks up the current surplus in supply.
This year’s price plunge saw equity values smashed by more than 70 per cent for higher cost producers. Leading producers Rio Tinto, BHP Billiton and Fortescue also came under price pressure.
But the 4 per cent bounce in the price was enough to fuel big share price recoveries yesterday. Atlas closed up 5.3c or 14 per cent to 42c, Mt Gibson added 8c or 18 per cent to 52.5c and BC Iron rallied 18.2c or 13 per cent to $1.59.
Mt Gibson’s performance was helped by the release of its September quarter report, which showed it was holding cash of $465 million (43c a share) at the end of the period. That was down from $520m at the end of June, but after $30m was spent on mining equipment and tax payments.
Rio’s share price climbed $2.35 or 4 per cent to $60.71, with renewed hopes for iron ore to get back to the $US90-$US100 a tonne to be helpful in its unfolding cold war with spurned suitor, the iron ore-deficient Glencore. BHP added 85c or 2.6 per cent to $33.45 and Fortescue regained 19c or 5.4 per cent to $3.65. Baillieu Holst analyst Adrian Prendergast said the iron ore price rise was the first sign that a seasonal uplift in iron ore demand was under way.
“China is now back online following its week-long national holiday, which typically sees a seasonal improvement in steel production,” he said.
“It is unlikely that the iron ore market will bounce back to previous levels as swiftly as it did in late 2012 during the last material spot price weakness, but we believe that we will see a gradual moderation of recent extreme volatility and that the spot price is more likely to recover gradually back towards a range of $US90-$US100 a tonne heading into 2015,’’ Mr Prendergast said.
Citi has updated its iron ore price forecast to $US87 in the fourth quarter. Japan’s Marubeni, a major stakeholder in Gina Rinehart’s Roy Hill project in WA, also called the bottom of the iron ore slump, saying prices would recover next year.