According to The Australian Financial Review, the spot price of iron ore extended its rally this month to 6 per cent, defiantly challenging increasingly bearish forecasts.
Ore with 62 per cent content in Qingdao ended up 3.5 per cent to $US77.94 a tonne on Friday, according to Metal Bulletin, rising for a sixth consecutive week. The price surge was paced by soaring iron ore futures traded on the Dalian Commodity Exchange.
Consensus forecasts continue to call for the spot price to retreat as this year progresses, on expectations that demand for steel in China will ease and as supplies from Australia and Brazil rise. Credit Suisse sees iron ore averaging $US70 a tonne in the September quarter before sliding to $US55 in the final three months of 2017. Citigroup, Sucden Financial, Axiom Capital Management and hedge fund Academia Capital also are bearish.
A renewed effort by Chinese authorities to shutter older, inefficient steel mills now and through the approaching winter season there has been linked to higher steel output as mills seek to capture as much profit as they can. As long as profit margins remain high for mills, they will keep producing at full speed. But with economic growth in China expected to slow, the outlook for steel is becoming somewhat more clouded.
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