BHP Billiton doesn't see the rally in iron ore and coal lasting

Getty/ Ryan Pierse

Bucking dire expectations from the beginning of the year, iron ore and coking coal prices have been on a tear in recent months, rising by around more than 50% from mid-January.

The scale of the rally has been breathtaking, creating optimism in some quarters that the worst of the price declines have now past, with recent gains likely to be sustained on an uplift in China’s construction activity.

While that may well be the case, that’s not what Australia’s largest listed miner — BHP Billiton — believes.

Speaking at the Melbourne Mining Club on Thursday, Mike Henry, BHP’s minerals Australia president, stated that he does not believe recent gains in iron ore and coal will last more than a few months, suggesting that the price surge would bring more marginal supply back on to the market, according to a report from Reuters.

“I wish I could stand here and say this is going to be sustainable. I don’t think it is going to be,” he said.

Despite the assessment from Henry, Australian-listed shares in BHP Billiton remain in high demand from investors. Midway through Thursday’s trading session they sit up 3.963% at $21.14.

From the low of $14.06 struck on January 21 this year, Australian-listed shares in the miner have rallied by 50.3%.

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