Iron ore price hovers above $US55 a tonne

The iron ore price held firm overnight as Macquarie lifted its rating on BHP shares to outperform.

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

The iron ore price is holding steady, a whisker above the price estimate provided in the Federal Budget, as Macquarie analysts upgraded the outlook for mining giant BHP Billiton.

Iron ore settled at $US55.30 a tonne overnight, according to The Steel Index, unchanged from the previous session.

The commodity has been gradually easing back from a mid-August peak of $US61.80, with volatility sparked earlier this month by restrictions on industrial activity in China for the G20 summit.

If the key export sheds only another 0.7 per cent, it will be back below government forecasts. Iron ore has surprised many observers and offered some short-term relief to Canberra by managing to hold above the $US55 a tonne Budget estimate for much of this year.

Shares in BHP rose 1 per cent in London trade after Macquarie lifted its rating on the stock to outperform.

“Stronger demand and impact of supply side reforms in China have enhanced the outlook for most bulk commodities,” Macquarie said, according to Dow Jones.

But Macquarie singled out coking coal, thermal coal and manganese as the commodities for which it had “materially” upgraded its forecasts, while also lifting ratings for South32 and New Hope.

Analysts at a number of banks still expect iron ore to fall further as supply continues to outpace demand. The world’s biggest producers are set to increase output by nearly 50 million tonnes in the year to June 2017, Bloombergreported.

China is aiming to reduce extra capacity in its steel producers, and lower demand from steel mills is a negative for prices. Yesterday, news emerged that state-owned Baosteel Group will acquire Wuhan Iron and Steel Group as part of a push to consolidate the industry.

Meanwhile, Rio Tinto shares closed steady in London.