Iron ore price surge continues

The price of iron ore is closing in on the $US60 a tonne mark after enjoying a surge of more than 5 per cent.

At the end of last session, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US57 a tonne, a 5.6 per cent rise.

Since dropping to $US46.70 a tonne on April 2, iron ore has gained 23 per cent or $US11 a tonne.

The price rise is good news for miners BC Iron, Mt Gibson and FMG which all suffered a margin squeeze when the price of the commodity started to tank earlier this year.

"If the recent rally is a portend for the future, as we think it may be . . . then Australia's higher-cost iron ore producers are on a more stable footing," HSBC said.

Helping the recovery was BHP Billtion's revelation last week that it would slow its ramp up to 290 million tonnes of iron ore production a year.

In its March quarterly report, the miner said it would defer a planned inner harbor debottlenecking project which would have increased production by 20 million tonnes a year by 2017.

Also improving sentiment is news that China, the world’s biggest importer of iron ore, has moved to stimulate its economy.

"For Australia, an important part of China's policy stimulus program is the focus on infrastructure investment," HSBC explained.

"Infrastructure investment is steel-intensive and thus supports demand for iron ore. But demand is not the only story for the iron ore market. There are also some signs that growth in iron ore supply, which has been strong, has started to slow down."

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