Iron ore price hovers close to $US65 a tonne

The iron ore price has steeled itself at a six-month high, as analysts warn that the recent rally is on shaky ground.

A mine worker watches as a haul truck is loaded by a digger with material from the pit at Rio Tinto Group's West Angelas iron ore mine in the Pilbara. (Photographer: Ian Waldie/Bloomberg)

The iron ore price has held steady at a six month high as analysts warn the recent rally is driven by euphoria rather than fundamentals.

Iron ore was unchanged at $US64.40 a tonne overnight, according to The Steel Index, its highest point since settling at $US65.20 on April 29.

The commodity’s dazzling rally has now extended for close to four weeks, as it has fallen only once in the last 18 sessions.

With speculative interest high, iron ore could push even higher or remain at surprising levels in the near term, but some analysts are warning that the recent strength is unsustainable.

“Iron ore prices have jumped more than 18 per cent since Chinese markets returned from their week-long holiday in the first week of October,” Macquarie analysts said in a research note.

“We believe prices are being swept up in the market euphoria driving all commodities higher in the last few weeks in China, as domestic investors chase commodities on concerns around inflation and RMB depreciation.

“We do not believe fundamentals in China are supportive of this latest leg higher in iron ore prices.

Rising iron ore supply, as evidenced by surging imports and rising port inventory, combined with very weak steel margins and seasonally lower steel production in the months ahead should combine to send iron ore prices back towards the more fundamentally sustainable $US50 a tonne level.”

The commodity has been pulled higher as prices for another key steelmaking ingredient, coking coal, have surged. News that major producers had reduced their shipment forecasts also gave the commodity a boost.

In London trade, BHP Billiton shares fell 0.9 per cent, while Rio Tinto lost 0.5 per cent.