Iron ore price surges above $US60 a tonne

The iron ore price has once again defied analyst predictions of an impending fall, soaring to a near three-month high.

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 surged to a near three-month high, rising above $US60 a tonne for the first time since the week of the May Federal Budget.

Iron ore jumped 2.9 per cent to $US60.50 overnight, according to The Steel Index, from $US58.80 in the previous session.

This is iron ore’s highest level since May 4, when it settled at $US61. In the same week, the budget had predicted an average price of $US55 a tonne over the coming year, a level which many analysts saw as optimistic.

The commodity has been surprisingly resilient this year in the face of several calls for its decline, and has now rallied 26 per cent from its June 2 trough of $US47.90 a tonne.

Even though the market remains in oversupply, Goldman Sachs recently noted that stockpiles at Chinese ports remain at historically low levels, supporting the commodity.

Traders have also bid up iron ore this year on hopes of stimulus spending from the Chinese government, while Chinese steel mills went through a seasonal restocking cycle that kept prices higher for longer than many expected.

The stunning price spike did not stop another analyst team from joining the chorus of calls for iron ore to decline later this year.

Broker Ord Minnett said in a note that Chinese steel production has been growing to meet demand from a rise in building starts and strong infrastructure spending.

“Looking forward, we expect Chinese steel production to fall slightly into year end, in line with the usual seasonality, which could see iron ore prices soften from the currently buoyant levels,” Ord Minnett analysts wrote.

The broker reaffirmed its price forecasts of $US53 a tonne in the second half of 2016 and $US48 a tonne in 2017. This places it at the more bullish end of the current spectrum of forecasts, with some analysts tipping falls as low as $US40 a tonne.

In London trade, BHP Billiton rose 2 per cent, while Rio Tinto added 1 per cent.