Iron ore falls for third straight session

The iron ore price has edged lower, as Macquarie tips prices will remain above the $US50 a tonne mark in the near term.

Iron ore awaits loading at BHP Billition Ltd.'s loading facility at Nelson Point in Port Hedland (Photographer: Nelson Ching/Bloomberg News)

The iron ore price has fallen for the third straight day, even as one investment bank offers the upbeat assessment that the commodity is unlikely to drop through the $US50 a tonne threshold in the near term.

Iron ore lost 0.5 per cent to $US55.90 a tonne overnight, according to The Steel Index, from $US56.20 the previous day.

The commodity has been hovering above the $US55 level, the estimate given in May’s federal Budget for the key export’s average price over the following 12 months. It has eased back from a three-and-a-half month peak of $US61.80 last month, with volatility driven by a temporary and localised shutdown in Chinese industrial activity.

Analysts at Macquarie are hopeful that demand from Chinese steel mills will put a floor under prices for the steelmaking ingredient.

“Iron ore inventory was drawn lower at mills last month, but mills are showing an increasing appetite to raise purchases this month, although in part this may be due to restocking ahead of the week-long October 1 public holiday,” the investment bank said in a research note.

“However, we have been pointing to low steel mill iron ore inventory as a supportive factor that should prevent iron ore prices dropping sharply below $US50 a tonne even as iron ore supply lifts into the fourth quarter per usual seasonal trends from Brazil and Australia and a return of Indian shipments post monsoon season.

“These latest survey results strengthen our belief in this view.”

The bank added that although the commodity is set to fall below current levels next year, “iron ore prices can hold up better through 2017 than many expect”.

In London trade, BHP Billiton rose 1.8 per cent, while Rio Tinto added 2.7 per cent.