Iron ore price hits 6-month high of $64.40 per tonne

The rally of iron ore price continues, hitting a six-month high on Wednesday after it established a seven-week high on Oct 27. Price of the key-steelmaking ingredient increased 0.9 percent to US$64.40 (A$84.16) per tonne overnight, according to The Steel Index.

It was up from Tuesday’s US$63.80 (A$83.40), defying industry forecast. Also indicating higher prices are Dalian iron ore futures, The Australian reports. The boost is the sixth gain of the commodity in the past seven sessions, the Metal Bulletin says. Iron ore price went down only once in the last 17 sessions.

Iron ore price is at its highest level since April 29 when it traded US$65.20 (A$85.21), extending the price surge in 2015 to 50 percent. Demand for the commodity also is up in China, the key market for iron ore. PMI data from the Chinese government and Caxin-Markit surveys show a boost in activity levels in October at its fastest level since July 2014, Business Insider Australia reports.

According to the new orders subindex, a gauge on future steel demand, the index went up to 54.6 from 49.2, while a separate China steel industry PMI, which influences bulk commodities, registered an index of 50.7 from 49.5 in September.

Deutsche Bank analysts, in a research note, explain the recent price rallies of iron or to supply shocks. They upgraded this week their near-term views on the Chinese steel industry following meetings with companies and industry observers in China.

“Supply will increase and transport bottlenecks will be resolved, but this takes time and is positive for pricing in coal, coke and iron ore in the near term,” the analysts write. But they forecast a drop in price of the commodity in the near term due to significant changes in China’s policy which is a major risk to the bullish prediction.

Bradford Research, steel analysts, believe speculation on Chinese exchanges contributed to the rally in iron ore price.