Iron ore price snaps winning streak

The iron ore price slipped to $US62.30 a tonne overnight, breaking its streak of 13 sessions without a fall.

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, Australia. (Photographer: Ian Waldie/Bloomberg)

The iron ore price has snapped its winning streak, edging back from a near six-month high as one analyst warns the recent rally could have been exacerbated by speculation.

Iron ore fell 0.6 per cent to $US62.30 a tonne overnight, according to The Steel Index, after reaching a peak of $US62.70 the previous day. Before the fresh fall, iron ore had either gained or held steady for 13 sessions in a row.

The rally had gathered pace in line with a rise in the price of coking coal, as well as a fall in shipment forecasts from major producers. Fortescue Metals Group also added to the optimism by telling investors the market had come back into balance.

But given amount of the iron ore supply still to come online, the moves this week are not necessarily based on fundamentals, according to steel analyst Charles Bradford.

“There’s no reason for iron ore from a supply-demand standpoint to be going up,” the Bradford Research president told The Australian from New York.

Mr Bradford pointed to Rio Tinto’s plans to develop the Silvergrass mine, as well as Vale’s S11D, the ramp-up of Gina Rinehart’s Roy Hill and the future return to production of the BHP Billiton-Vale joint venture Samarco project in Brazil. “The likely future supply has gotten worse, not better.”

Speculation on exchanges in China could be contributing to the recent rise, he said.

“The Chinese exchanges are not like exchanges elsewhere,” he said. “There can be a lot of individual investors who are playing the charts — in other words, following trends. And some of these exchanges don’t have tremendous volume.”

Overnight, Brazil’s Vale reported a swing to profit in the third quarter, but hinted at disagreement with BHP over waste disposal and debt at Samarco.

In London trade, BHP Billiton shares fell 1 per cent, while Rio Tinto added 0.2 per cent.