Iron Ore Climbs to 5-Month High Boosting Miners’ Share Prices

on Dec 20, 2012

On Wednesday, the share prices of the three leading iron ore miners have rallied to near one-year highs after equity investors bought into the sector which saw the price of the commodity used in steelmaking climbingto a five-month high, The Financial Times reported on 19 December 2012.

**Iron Ore Reaches5-Month High as China Buys**
Spot iron ore jumped to its highest in almost five-and-a-half months on Wednesday. The benchmark index for 62-per-cent grade iron ore jumped 2.5 percent or $3.3 to $135.50 a tonne — a level last seen on July 10, which also represents a 50 per cent increase from a low of $88 a tonne in early September. So far this month, iron ore prices have advanced by 17 per cent due to an improved outlook for China whereiron ore is seen as a proxy for industrial activity and construction. As China’s economy is showing signs of revival along with a rapid drawdown at port inventories of the steelmaking raw material, commodity traders have become more encouraged to pick up cargos.

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Some analysts predict that this current trend will remain, beating market expectations in regards to next year’s iron ore prices. According to Michael Shillaker of Credit Suisse in London,investors’ forecasts for the commodity prices in 2013 were low. He said in a note to clients on Wednesday that estimates are “likely to be exceeded” as “China re-accelerates its infrastructure spend as part of its overall 8 per cent GDP growth target in 2013”.Analyst at Deutsche Bank in London Daniel Brebneralso supported higher iron ore priceestimates, but his forecast sees an increase in the first half of 2013, as fundamentals are “improving sufficiently” to expect higher prices over the short term. Yet he cautioned in anote to clients last week that iron ore fundamentals beyond the second half of 2013 were a “concern”.

**Iron Ore Price Jump Triggers Equity Investors’ Buying Spree**
Iron ore is a critical material for the profitability of large mining groups, including Vale (NYSE:VALE) of Brazil, Britain’s Rio Tinto (LON:RIO), BHP Billiton (LON:BLT) and Anglo American (LON:AAL), as well as Japanese trading companies such as Mitsui & Co (TYO:8031). The price of iron ore is also crucial for the world’s largest steelmakers, including Luxembourg-based ArcelorMittal (AMS:MT) and Baosteel Group of China.

!m[Shares in Vale, Rio Tinto and BHP Billiton Near One-Year Highs as Investors Look to Iron Ore Equities](/uploads/story/1076/thumbs/pic1_inline.png)
Most of these industry participants have been positively affected by the increasing price of the commodity used in steelmaking. Some more than others, however, with the leading iron ore producers experiencing the most significant boost in value. Following yesterday’s iron ore price surge, the share prices of Vale, Rio Tintoand BHP Billiton, which together account for the bulk of the seaborne iron ore market, rose to a near one-year high. As equity investors poured money into the commodity sector amid the increasing demand from China, the mining giants’ stock climbed to levels last seen in February.
Vale’s share price peak during yesterday’s trading in New York was $20.55, while in London, Rio Tinto reached 3612 pence and BHP climbed to 2179 pence.


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