Iron ore price bucks bearish predictions

BHP and Rio Tinto shares surged in London overnight, as the price of the steelmaking commodity leapt almost 3pc.

Elizabeth Redman

Despite slowing output growth, several analysts still expect iron ore supply to continue to outpace demand over the near term. (Pedro Lobo Bloomberg News)

less than 2 min read

6:46AMJuly 27, 2016.

Updated 1:25PMJuly 27, 2016

The iron ore price has jumped as Chinese miners lash out at their low-cost Australian rivals, accusing them of dumping the commodity and harming higher-cost producers.

Iron ore rose 2.9 per cent to $US57.40, according to The Steel Index, from $US55.80 the previous day.

In London trade, BHP Billiton shares shot up 3.3 per cent, while Rio Tinto added 3.1 per cent, and the commodity’s strength could also offer a boost for the mining giants when the ASX opens.

Some 20 Chinese miners released a statement calling for an investigation into China’s imports of the raw material, saying “a huge volume of low-priced iron ore has had a severe impact on the domestic mining industry and even posed a big challenge for the security of steel production”, Reuters reports.

“Vale, Rio Tinto and BHP Billiton which have dominated global iron ore trade have defied the market and are still expanding despite prices being low since their strategy is to use low-priced dumping to crowd out higher-cost miners,” the Chinese miners reportedly said.

BHP Billiton declined to comment, while Rio Tinto and Vale have not responded to requests for comment.

The comments could raise eyebrows, after the US earlier this year imposed heavy tariffs on Chinese steel imports over concerns of dumping from China’s exporters.

The accusations follow last week’s production reports, in which Australia’s major miners signalled that they would increase supply at a slower pace than in previous years, although there was little sign of any willingness to reduce output.

Despite the slowing output growth, several analysts still expect iron ore supply to continue to outpace demand over the near term, putting more pressure on a price that has this year remained remarkably resilient.