Iron ore climbs to fresh six-month high as analysts turn bullish on Chinese steel

Iron ore has continued its bullish run, with the price of the commodity climbing to $US64.40 a tonne overnight.

The ore carrier Vale Beijing is towed away from the Ponta da Madeira terminal, in Sao Luiz, northern Brazil.

The iron ore price has continued its dizzying rise, notching up a fresh six-month high as some analysts start to become more bullish on Chinese steel demand.

Iron ore added 0.9 per cent to $US64.40 a tonne overnight, according to The Steel Index, from $US63.80 the previous day, while Dalian iron ore futures are still pointing higher. The last time iron ore settled at a higher level was on April 29, when it reached $US65.20.

The commodity has dropped only once in the last 17 sessions as traders hope that a drop in shipment forecasts from major producers will offer a boost. A strong run in prices for coking coal, another key steelmaking ingredient, is also buoying iron ore.

Deutsche Bank analysts this week upgraded their near-term views on the Chinese steel industry after meetings with Chinese companies and industry observers.

“Recent price rallies [for steel] can in part be attributed to supply shocks,” Deutsche analysts said in a research note.

“Supply will increase and transport bottlenecks will be resolved, but this takes time and is positive for pricing in coal, coke and iron ore in the near term.

“Furthermore, property demand declined less than we had forecast, and infrastructure is likely to remain robust.”

But over the medium term steel demand is still likely to fall, Deutsche said, adding that significant changes in Chinese policy would pose a major risk to their bullish thesis.

The comments come in contrast to steel analysts Bradford Research, who said last week there was “no reason” from a supply-demand view for iron ore prices to be rising, suggesting speculation on Chinese exchanges was contributing to the rally.

Most analysts expect the commodity to drop into the low $US50s or $US40s, but such falls have proved elusive.

In London trade, BHP Billiton shares lost 0.9 per cent, while Rio Tinto added 0.2 per cent.