[av_heading heading=’Iron ore prices slip after sharp rally’ tag=’h3′ style=’blockquote modern-quote’ size=” subheading_active=’subheading_below’ subheading_size=’15’ padding=’1′ color=” custom_font=”][/av_heading]
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10 July 2017
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The price of iron ore has cooled after a recent barnstorming run that saw the steel-making ingredient advance 20 per cent in just two and half weeks.
Benchmark Australian ore with 62 per cent iron content fell 1.3 per cent to $62 a tonne on Tuesday, according to an assessment for the Steel Index.
Iron ore, a key source of profits for some of the world’s biggest mining companies, including BHP Billiton, Rio Tinto and Vale, has surged 20 per cent since falling to $53 a tonne in the middle of June. It has been boosted by strong demand from Chinese steel mills, where production was running at an annualised rate of 850m tonnes in May, but also a decline in bond yields and money market rates in the world’s second biggest economy.
“The 20 per cent rally appears to be related to improved sentiment around China’s credit conditions,” said analysts at JPMorgan. “We note Shibor [Shanghai interbank overnight rate] has fallen materially over the past week.” China’s efforts to rein in credit growth have sent a shudder through metal markets this year.
The clampdown has also weighed on the mining sector, where share prices are down by more than 10 per cent from their February highs. But in recent weeks there has been a change of tone in Beijing regarding financial tightening. “Our Chinese economists believe the recent push to tighten regulation has peaked this year, and we will see more forbearance in the second half of the year on growth concerns,” wrote analysts at Citigroup. As such, many traders believe iron ore prices are well supported at current levels, even though there are large stocks piles of material in China that could be released into the market. Another reason for optimism is the monsoon season in India, which should limit exports. In April, India’s exports were running at an annualised rate of 50m tonnes.
The price of zinc, which is used to galvanise steel, has also risen sharply in recent weeks, gaining 15 per cent since the second week of June. It recently hit $2,800 a tonne before it was hit by profit taking. On Tuesday it was down $23 at $2,785 a tonne. Its rise has been fuelled by a decline in warehouse stocks and availability of the raw form of the metal, which is called concentrate. Glencore, the Swiss-based commodity trader and miner, has yet to return 500,000 tonnes of mothballed zinc production to the market.
Source-ft
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