We’ve been watching it for a while now but iron ore finally broke through the $97 tonne level on Friday night for a very strong weekly close.
It’s the fourth week in a row that iron ore has finished higher after a strong bounce from the $86.67 low a month back.
Closing Friday night at $97.17, 62% Fe futures for September delivery are now $8.5 tonne higher (9.59%) than the recent low.
Earlier this month we highlighted that both Fortescue Metals CFO Stephen Pearce and analysts at Citigroup were bullish on the price of ore and this break, which is in effect a reverse head and shoulder break, is targeting the $102 region. Traders of iron ore and iron ore miners like Fortescue, Arrium, Atlas and BC Iron will also be excited.
But, according to Reuters, it is not yet universal excitement because even though demand for high grade ore product is growing “there’s still a lot of supply”.
A Shanghai-based trader told Reuters that “I think $100 is a bit difficult to achieve this month because of the oversupply and I don’t think there will be increased demand for steel during summer time.”
It’s a sentiment echoed by ANZ strategists who wrote that “Steel mill stocks generally average one month of consumption and recent conditions indicate that mills are in no hurry to buy more. Any price gains over the next week are unlikely to be sustained as mills try to protect fragile profit margins.”
So the argument rages. While there is a clear upward break in iron ore on the daily futures prices, the long-term monthly decline looks like it is still intact.
It’s going to be interesting to see where iron ore goes and it is very important for Australia’s national income.