Iron ore prices to dip

Analysts predict iron ore prices will fall in the coming months as the Reserve Bank holds off on further interest rate cuts.

The bank believes iron prices, which hit $157.10 a tonne overnight, will fall to lower prices in the coming weeks, The West Australian reported.

"Iron ore prices had increased significantly over the past two months, largely reflecting stronger demand from China owing to increased industrial activity there as well as some rebuilding of iron ore stocks after earlier depleting inventories," the bank said.

"However, iron ore prices had run well ahead of Chinese steel prices in recent months and it was widely expected they would not be sustained at these high levels."

Iron ore prices have surged more than 70 per cent in the last four months.

The spot price fell to lows of around $90 in the second half of 2012, but the market has taken back almost all of the lost ground.

Minutes of the bank’s February meeting show interest rates are likely to remain on hold as the high Australian dollar continues to cause discomfort for trade-exposed parts of the economy.

In an interview with Melbourne Today, Mark Pervan, head of commodity research at ANZ, said the price of iron ore may fall by $5 to $10 a metric tonne to the “high if $140s”.

“At about $155, we think there’s slightly more downside risk,” he said.

“The key question will be, are the traders prepared to come in now and start restocking?” said Pervan.

“Probably not. It’s probably a little too high. What it does mean is that they’ll be quite opportunistic to buy slight dips. You might see easing prices, but it won’t fall sharply.”

Surging iron ore prices have restrengthened projects in Western Australia, sending miners back to work on major projects.

Rio Tinto will expand its iron ore operations in the Pilbara with a $3 billion dollar investment set to create over 2000 jobs in the region.

Fortescue Metals Group will restart work on its Kings deposit, a project sidelined last year after the fall in commodity prices.

Image: ironorebuyers.com

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