Iron ore extends winning streak, price nears 2016 peak
The iron ore price tapped a fresh six-and-a-half-month high overnight and is now trading within $US1 of its 2016 peak.
The iron ore rally shows no signs of slowing, with the commodity reaching a fresh six-and-a-half-month high overnight and coming within a whisker of its highest level this year.
Iron ore added 1.5 per cent to $US67.80 a tonne overnight, according to The Steel Index, from $US66.80 yesterday.
The commodity is trading within $US1 of its 2016 peak of $US68.70, which it reached on April 21. Its rally now stretches to a streak of 22 sessions with only one drop in that time.
The gains were again positive for Australia’s biggest miners in London trade, with BHP Billiton surging 4.7 per cent and Rio Tinto adding 1.7 per cent.
The most recent gains have been spurred by a spike in the price of coking coal, another key steelmaking ingredient, and exacerbated by speculation that the rally can continue.
But the commodity has been surprisingly strong all year on hopes that Chinese investment in infrastructure will support demand, with many analysts sceptical that prices can remain at elevated levels in a market they still see as oversupplied.
Analysts at CLSA, visiting China on a materials tour, noted the effect of both speculation and infrastructure activity on the rally.
“Liquidity is seen as abundant and looking for a home,” CLSA wrote in a note.
“The supply-side reform theme is still in place, while demand is generally seen better than earlier expectations on property construction and multiplier effect, and elevated infrastructure activity.
“Looking ahead, infrastructure is seen as the key growth driver, while property is expected to become a drag.
“Commodities demand growth expectations in 2017 is so far seen as positive, but [at a] lower growth rate than this year.”
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