Iron ore price firms to seven-week high

Iron ore’s rally extends to 11 sessions as shipment forecasts are lowered and a recovery in steel demand is eyed.

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

The iron price has pushed to a seven-week high as major miners reduce their shipment forecasts and one investment bank calls a recovery in steel demand.

Iron ore rose 0.5 per cent to $US58.70 a tonne overnight, according to The Steel Index, from $US58.40 in the previous session. The commodity settled at its highest price since September 5, when it was at $US58.80.

Iron ore has now chalked up 11 sessions in a row without a fall, partially reversing September’s losses and defying widespread predictions that the market will remain oversupplied even as output grows at a slower pace than in the past.

Credit Suisse analysts noted that Vale reduced its 2017 guidance last week, while Rio Tinto cut its fiscal 2016 shipments forecast.

“This continues a trend we have seen throughout 2016 and our supply tracker shows output from the majors growing at under 2 per cent year on year through Q2 and Q3,” Credit Suisse said in a research note.

Meanwhile, global steel output is now growing at around 2 per cent, according to the bank.

“We see further room for apparent demand to push higher in Q4 and 1H17, which should provide support to iron ore prices,” Credit Suisse said.

“In China, apparent demand, having undershot real demand through 2015 and the year to date, is now on the rise, with the latest data translating to apparent demand uplift of 9.4 per cent year on year in September.”

The iron ore price fell steadily for around two years before reaching a trough below $US40 a tonne in December 2015, then surprised many observers by bouncing back during 2016 on news of large-scale stimulus plans in China.

Most analysts still expect a near-term fall into the low $US50s or $US40s, but many have recently scrambled to upgrade their forecasts after the price provide surprisingly resilient in recent months.

In London trade, BHP Billiton shares rose 0.3 per cent, while Rio Tinto added 0.3 per cent.