For the first time in two-and-a-half years, iron ore prices have soared past US$90 a tonne. This is a 5.5 per cent increase up from US$87 the session prior, according to the Steel Index.
Overall this is an increase of more than 14 per cent over the past two weeks when the price started at $US80.20 a tonne, according to a report in The Australian. The report states that the price is being driven by high Chinese ore imports.
“The fact we have seen stockpiles of iron ore at Chinese port increase to a new 10-year high of 127 million tonnes (+2.8 per cent on the week) is certainly helpful,” IG chief market strategist Chris Weston said. “But then you also hear that the Chinese Ministry of Environmental Protection has proposed a draft to further cut steel and aluminium producers by as much as 30 per cent in 28 cities across five regions, and this is like a red rag to a bull for the speculators.”
There is still caution in the market about the prices rise, because the industry knows that Rio Tinto, BHP Billiton and Roy Hill mines have got a lot of ore coming online over the next couple of years.
However, analysts have been caught out by the rise in prices, with many predicting the current price wouldn’t be reached until after 2020. But before shareholders and speculators get too excited about the current numbers being reached, most analysts still predict that it will average out at about $55 a tonne for the year.