Iron Ore
A worker checks a truck loaded with iron ore at the Fortescue Metals Group (FMG) Christmas Creek iron ore mine located south of Port Hedland in the Pilbara region of Western Australia, November 17, 2015. Reuters/Jim Regan/File Photo

Since iron ore prices hit a three-month high in August of more than US$60 (A$80.24) per tonne, miners and investors believe it would no longer dip to US$30 (A$40.12) as previously predicted. Although prices had gone down by over 9 percent over the past three weeks, it remains above US$50 (A$66.89) per tonne for the past 198 days, except for three days.

Australian Financial Review explains the higher prices of iron ore to stimulus in China and supply interruptions in Brazil and Western Australia which tightened the iron ore market. The increase in Chinese demand in 2016 and lack of urgency among miners to getting new supply in the market is a surprising development, says Todd Warren, portfolio manager of Colonial First State Global Asset Management’s Global Resources tem which manages about US$2.5 billion (A$3.35 billion) across multiple funds.

BHP Billiton’s output was slowed by a two-year rail maintenance campaign and bad weather in the March quarter, while delays in its autonomous train programme also slowed Rio Tinto’s longer-term production. With the realisation by the giant miners that it cannot continue flooding the market, the chances of iron ore price dipping to US$30 has small chances of occurring, says Warren.

Iron ore was trading at US$56.09 (A$75.29) on Wednesday from US$62 (A$83.23) on Aug 23, including cost of freight. Many analysts, such as Morgan Stanley, forecast weakness and predicted in August that prices may slide down to US$40 (A$54.68) in the second half of 2016 due to anticipated lower demand in China because of the approach of winter.

Meanwhile, the Roy Hill Holdings of mining magnate Gina Rinehart admits struggling to meet its 55 million tonnes per annum capacity target in 2017 as it works through early teething issues. Barry Fitzgerald, chief executive of Roy Hill, said by the end of September, the mine would have produced about 14 million tonnes, reports The Australian.

“Once you lose tonnes it’s very difficult to make them up; we don’t have a lot of excess tonnes in the system so whatever we lose in the short term next year we probably won’t make up,” says Fitzgerald.

VIDEO: Iron Ore Price Correction Imminent

Source: Dukascopy TV

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