Iron ore stays above US$50

The iron ore price has maintained headway, staying above the half century mark.

It marks a return to strength for the metal,after it dropped below the new watermark last week for the first time in four weeks.

Iron ore sat at US$53.80 per tonne at the Chinese Port of Tinajin.

The positive movement comes as the Port Hedland records new export highs, hitting 39.53 million tonnes in March, jumping 7.9 per cent month on month.

This continued strength is predicted to soon falter, according to market analysts.

Speaking at a roundtable last month, UBS analysts Glyn Lawcock and Daniel Morgan outlined the reasons for the shortlived rally experienced by iron ore earlier this month, and why the metal’s softening to more sustainable levels will be more beneficial for the industry.

According to Morgan, it grows after Chinese New Year due to stockpiling, and the rally itself caught the market by surprise.

“The magnitude surprised the market, it as a stronger rally than expected,” he said.

UBS reports dismissed the strong upwards movement as a flash in the pan, stating it was “based on macro hopes and short-covering with little evidence of fundamentally better demand – yet”.

It stated that the sharp rise and subsequent fall was based on the typical rise following Chinese New Year combined with a predicted growth in the country’s infrastructure and property markets, Morgan adding that the “property market accounts for 40 to 50 per cent of Chinese steel demand”, however  the “latest data doesn’t show an infrastructure lift – yet”.

“The trade signals are not strong enough yet for a sustainable lift in demand,” Morgan said, “prices rallied in hope.”

Morgan pointed to a lower price point for the long term, floating around an average of the mid US$40s per tonne, with UBS data noting: “We don’t see prices sustaining low to mid US$30s for any significant period of time; we believe supply will respond to preserve margins.”

“We forecast US$45 per tonne 16e and US$47 per tonne 17e.”

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