Iron ore recovery not expected to last

Iron ore had its biggest one-day gain in over a year on Monday with the price rising by nearly four per cent.

A $3.20 gain saw prices lift from five-year lows to trade at $US85.20 a tonne.

This is still down 36.5 per cent on what the resource was receiving at the start of the year, and many expect it to remain low, despite slight jumps as seen yesterday.

Mount Gibson Iron boss, Jim Beyer, explained that the last quarter was traditionally a strong one for the iron ore market.

“You get this consumption of stocks in China and then a rebuild of the stocks heading into winter, so traditionally the last quarter of the year is a fairly strong one,” Beyer said.

“They’ve got to start restocking at some point in time.”

Morgan Stanley said the price may pick back up to high of $US90 a tonne by the end of the year, but this is not expected to last long-term.

Last week, Goldman cut its price forecast by $US10 to an average $US80 a tonne next year.

This was in line with other analysts who predict millions of tonnes of oversupply will not be absorbed by China, resulting in $US70 a tonne lows by 2016.

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