Iron ore price rises overnight to $58.70, hits seven-week high
The forecast by Bloomberg analysts that iron ore price would reach US$58 (A$76.51) in the second half of 2017 came earlier than expected. Price of the key-steelmaking ingredient went up overnight by 0.5 percent to US$58.70 (A$77.20) per tonne from US$58.40 (A$76.81) from the previous session.
It is the highest price in seven weeks when iron ore price reached US$58.80 (A$77.32) on Sept 5, The Australian reports. It is the 11th consecutive session that iron ore price is increasing, which partly reverses the losses in September and defies widespread forecast the market would remain oversupplied amid growth in production at a slower pace compared in the past.
Credit Suisse, in a research note, says the improving iron ore price continues a trend analysts observed throughout 2016. The bank’s supply tracker says output from major miners expanded at less than 2 percent on year through the second and third quarters.
The bank sees more room for apparent demand to push higher in the fourth quarter of 2016 and first half of 2017 which would provide support to iron ore prices. It said latest data indicate the apparent demand hike of 9.4 percent year-on-year in September.
For Brazilian miner Vale, the company also has to deal with protecting its profits that continue to narrow because of its distance of more than 8,000 miles from key market China which increases the price of its iron ore compared to its Australian competitors BHP Billiton and Rio Tinto that are nearer the Asian giant.
As a result, Vale logged a US$13.5 billion (A$17.7 billion) loss in 2015, Sydney Morning Herald notes. Vale operations are returning to profit in 2016, but Bloomberg analysts forecast a drop in earnings in 2017. To address Vale’s financial concerns, Murilo Ferreira, Vale CEO, must sell assets and streamline operations to reduce costs to US$10 (A$13.16) per metric tonne in 2018.
