Iron ore has defied predictions and risen above US$60 per tonne overnight.
The metal rose 4.1 per cent to US$62.85 per tonne at Qingdao on Tuesday, taking the year’s total gain to 44 per cent.
Northen China benchmark prices rose to US$61.80 per dry metric tonne.
While a slight rally was expected following the end of Chinese New Year, analysts forecast the metal to drop to an average of around US$45 per tonne for the rest of the year, with Goldman Sachs particularly bearish, predicting a price of US$38 per tonne. A move iron ore began to make at the beginning of this month as it experienced its first loss in four weeks.
The majors themselves also remained bearish on iron ore, with BHP CEO Andrew Mackenzie pointing to the continuing oversupply issue as the main factor.
“We think the excess of supply will drive prices lower from where they are currently,” he said at the time.
“Directionally, I would say prepare for lower-for-longer.”
According to Bloomberg China’s stockpiles are beginning to deplete, raising domestic prices and encouraging steel mills to increase their own supplies.
The trade is responding to a lift in China’s steel production activity,” Tom Price, an analyst at Morgan Stanley in London, told Bloomberg.
However Vale’s additional supply predicted to come online later this year, combined with increasing export from Roy Hill are forecast to cap iron ore’s price rallies.