Iron ore price lifts despite bearish forecasts

The iron ore price has bounced back from a string of recent falls, despite fresh warnings of an imminent decline.

Gina Rinehart's Roy Hill mine in the Pilbara ships its first iron ore

The iron ore price has bounced back from a string of recent declines, despite a fresh warning that the commodity’s current level is unsustainable.

Iron ore rose 1 per cent to $US59 in the most recent session, from $US58.40 the previous day, according to The Steel Index.

The increase marked only the second rise for the steelmaking ingredient in the last eight trading sessions, as it eases back from the recent three-and-a-half month peak of $US61.80 that it reached last month.

Several analysts have warned that prices are set to decline after being boosted by announcements of Chinese stimulus spending this year, although the forecasts of sharp drops have yet to materialise.

Morgan Stanley analysts noted market concerns over the sustainability of iron ore prices around $US60 a tonne.

“We share that concern,” Morgan Stanley said in a research note, warning that Chinese housing starts could be set to decline and the market for car sales in China could get tougher, while tipping global iron ore supply to rise in the second half of 2016 and in 2017-18.

The bank also noted interruptions to Australian supply this year due to railway issues for the major exporters, adding that the ramp up of new capacity from Gina Rinehart’s Roy Hill mine has been slow.

“Of course operational issues could emerge again and China may add more stimulus but our base case of declining iron ore prices appears likely,” Morgan Stanley said.

In London trade, BHP Billiton shares rose 2.1 per cent, while Rio Tinto added 1.2 per cent.